The Home Affordable Refinance Program (HARP), originally scheduled to end in June, will be extended at least one more year, the Federal Housing Finance Agency has announced.

The program, which helps homeowners refinance their mortgages to more affordable terms, will be extended through June 30, 2011. It was originally scheduled to conclude June 10, 2010.

The program is the less well known companion to the government's Home Affordable Modification Program (HAMP), which helps homeowners lower their mortgage payments through loan modifications. Both are part of the government's Making Home Affordable Program, designed to help homeowners avoid foreclosure and stay in their homes.

Originally predicted to help 4-5 million homeowners refinance their mortgages, only 190,000 homeowners obtained HARP refinances in 2009. That's in sharp contrast to the HAMP, which has extended trial and permanent loan modifications to more than 1.3 million homeowners since the two programs were launched last April.

The HARP was intended to help homeowners who are current on their mortgages, but unable to qualify for private market mortgage refinancing due to a lack of equity. However, in the early months of the program, it turned out that many homeowners the program was intended to help had seen their property values decline too much to even qualify under HARP.

In October, the program's guidelines were changed to allow refinancing at up to 125 percent of a property's current value, to assist homeowners who owe more than the property is worth. Since then, participation in the program has slowly been increasing, but still lags well below the program's initial goals.

Homeowners the FHFA hopes to assist by extending HARP include those with various types of adjustable rate mortgages on which the payments are scheduled to significantly increase at some point, including those with balloon payments due and interest-only loans, or those with introductory rates that are scheduled to increase.

Many of those homeowners took out those loans with the expectation they would be able to refinance before their rates changed or the higher payments came due, but have been unable to do so due to a lack of home equity caused by falling real estate values. Allowing refinances at loan-to-value ratios of up to 125 percent is expected to help some, but not all, such borrowers.

Published on March 2, 2010