Editor’s Note: The HARP program expired Dec. 31, 2018, but most homes have increased in value considerably since HARP rolled out. This means many homeowners may currently be eligible for a standard conventional refinance.

If HARP 3.0 isn’t fully rolled out in 2014, perhaps some elements of it will be. Instead of HARP 3.0 we could see a “lite” version of the new program called HARP 2.1 or HARP 2.5.

The big news on the HARP 3.0 front lately is that Mel Watt has been confirmed as the new head of FHFA, the entity that oversees Fannie Mae and Freddie Mac.

This appointment is significant because Watt is perceived to be more friendly to the consumer, and less on the side of big banks and lending institutions.

Watt’s new role could be the tipping point for HARP 3.0. Watt’s predecessor, Ed DeMarco, was hesitant to implement aspects of HARP 3, because he was more focused on decreasing Fannie Mae and Freddie Mac’s role in the housing market. But with Watt at the helm, we could see some big changes to the HARP refinance program.

HARP 3 could:

• Allow non-Fannie Mae and –Freddie mac loans participate in HARP
• Remove or extend the HARP cutoff date of May 31, 2009
• Allow those who have used HARP to use it again
• Remove appraisal fees from all HARP loans
• Remove income verification requirements on HARP loans

Small HARP 3.0 Changes Could Come in Waves

While Watt is in an extremely powerful position as head of Fannie and Freddie – organizations that guarantee 60% of the nation’s loans – he may meet serious political resistance when implementing some or all of the possible HARP changes.

It’s for this reason that the HARP 3 program may be rolled out slowly. This could result in a program more aptly called HARP 2.1 or HARP 2.5. As more elements are rolled out as the program is tested, we could see a full blown HARP 3.0 program.

HARP 2.1: Extend the HARP Cutoff Date

The HARP progression could start by pushing out the date by which the original loan must have closed. As it stands, the original loan must have closed by May 31, 2009, a seemingly arbitrary date. By pushing out that date to December 31, 2010, for instance, hundreds of thousands more homeowners would be eligible for a HARP refinance.

This small change could end up being christened HARP 2.1.

HARP 2.5: Allow Re-HARPing

A slightly more difficult change would be to allow those who have used HARP to use it again.

When HARP was first available in late 2009, the 30-year fixed interest rate average was around 5% according to Freddie Mac’s interest rate survey. That same survey shows the 30-year rate at 4.48% as of the last week of December 2013.

Related Story: Mel Watt is New Head of FHFA

A homeowner with a $350,000 mortgage at 5% could save $109 per month and almost $40,000 over the life of the loan by dropping his or her rate to 4.48%.

Because the savings would be significant for so many underwater homeowners, letting people refinance with HARP even if they’ve used the program before would put millions of dollars back into the pockets of American homeowners.

If Watt does implement the re-HARPing rule or other aspects of potential HARP changes, we could see something called HARP 3 lite or HARP 2.5 – and possibly sooner than later.

Full HARP 3.0: Allow Non-Fannie and Non-Freddie Loans Use HARP

The last and most difficult change would be to allow homeowners without Fannie or Freddie loans refinance with HARP.

Millions of homeowners purchased houses with non-conforming loans in the 2000s. Non-conforming loans are simply those that didn’t fit within Fannie Mae or Freddie Mac guidelines.

Homeowners who have used non-conforming loans have been stuck with high interest rates and unstable loan products ever since. Because these loans are not owned by Fannie Mae or Freddie Mac, they are not eligible for HARP.

Nor are they eligible for the popular FHA streamline or VA streamline refinances.

The loan types that many people opted for during the loose lending of the 2000s were:

• Subprime loans
• Alt-A loans
• Option ARMs
• Washington Mutual Pay Option ARMs
• Countrywide Pay Option ARMs
• Wachovia and World Savings ARMs
• Negative Amortization loans
• No Income, No Asset Loans
• NINJA Loans (No Income, No Job or Assets)
• Bank Statement Loans (where bank statements proved income)
• Jumbo loans
• Portfolio loans

Many homeowners with these loan types have not defaulted, but faithfully made their payments in hopes that they could refinance into a more stable product like a 15-year fixed or a 30-year fixed. When home values plummeted, they no longer had the equity to obtain a conforming loan.

A full-fledged HARP 3.0 would allow these homeowners to finally get into a long-term mortgage product. It could lower their payments and help them hang onto the house if and when adjustable rates start to rise.

Are HARP 2.1 and HARP 2.5 Coming Soon?

It’s hard to tell the path that HARP will take toward the yet-to-be HARP 3.0 program. We can only hope that with Mel Watt’s appointment as FHFA head, we’ll see HARP changes soon, even if they are slow to arrive.

It’s quite feasibly that in 2014, we could see drastic HARP changes which would help homeowners keep their hard-earned dollars in their own pockets.

Keep checking our HARP 3.0 update center for the latest breaking news on this powerful loan program.