Government Help for an Upside Down Mortgage

The government might be able to help you refinance your home.

The government might be able to help you refinance your home.

If you're mortgage is upside down -- or underwater -- you owe more on your mortgage loan than what your home is worth. Refinancing the loan to take advantage of lower interest rates is a challenge when you're underwater; most conventional lenders want you to have at least 20 percent equity in your home before they'll approve you for a refinance. There is hope, however, in the form of the Home Affordable Refinance Program.

HARP 2.0

The Making Home Affordable Program, which is run by the Department of the Treasury and the Department of Housing and Urban Development, in mid-2012 extended and expanded HARP, which is designed to help homeowners with underwater mortgage loans acquire refinancing. The earlier version of the program was not available to homeowners who owed more than 125 percent of what their homes were worth. As of the date of publication, HARP is scheduled to expire on Dec. 31, 2013.

How it works

Although it is a government program, HARP is actually offered through private mortgage lenders. To qualify for a refinance through this program, you must work with the company that is already servicing your mortgage loan -- the company to which you send your mortgage payments each month. As with the previous version of HARP, your lender is under no obligation to refinance your underwater home loan. The government does provide financial incentives to lenders that complete HARP refinances, but it does not force lenders to originate refinances. Not all lenders participate in the program. Call your lender to determine if it offers HARP refinances.


You must meet certain requirements for a HARP refinance. First, your mortgage loan must have been sold to Fannie Mae or Freddie Mac before June 1, 2009. You must be current on your mortgage payments; may not have any late payments in the last six months; and may have no more than one late payment -- defined as more than 30 days overdue -- during the last 12 months. Finally, if you refinanced your mortgage loan through the earlier version of HARP, you will not qualify for a second refinance through the new version.

Getting Started

A HARP refinance will feel much like any other. To start the process, call your lender and explain that you think you owe more on your mortgage loan than what your home is worth and that you'd like to refinance your home through HARP. If your lender participates in the program, you will have to send documentation proving your gross monthly income and debts, including your last two paycheck stubs, tax returns and bank savings and checking account statements. You'll also have to give your lender permission to check your credit score.

About the Author

Don Rafner has been writing professionally since 1992, with work published in "The Washington Post," "Chicago Tribune," "Phoenix Magazine" and several trade magazines. He is also the managing editor of "Midwest Real Estate News." He specializes in writing about mortgage lending, personal finance, business and real-estate topics. He holds a Bachelor of Arts in journalism from the University of Illinois.

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