HARP LoanAlthough the Home Affordable Refinance Program is available for all property types, Fannie Mae and Freddie Mac have defined a HARP loan as its own special category. Only those loans secured by a primary residence with a loan-to-value ratio greater than 80% qualify.

Mortgages categorized as a HARP loan follow the same guidelines under the DU Refi Plus program for Fannie Mae loans and the LP Relief Refinance – Open Access program for Freddie Mac loans, but receive special pricing advantages which result in much lower mortgage rates.

Specifically, loan-level price adjustments (LLPAs) have been capped for borrowers that qualify for the HARP loan program. LLPAs are pricing adjustments (points) imposed based on credit score, loan-to-value ratio, property types and other loan characteristics which have the effect of increasing the mortgage rates higher than it normally would be. A 0.250 – 0.500 pricing adjustment typically has the effect of increasing the mortgage rates higher by 0.125%.

Fixed rate HARP loans with a mortgage term greater than 20 years are capped at 0.750 whereas those with terms equal to or less than 20 years do not have any pricing adjustments at all!

Fannie Mae and Freddie Mac differ in their treatment of non-HARP loans. Both have much higher caps for investment properties, but Freddie Mac extends the same HARP loan caps to second homes whereas Fannie Mae does not. Fannie Mae on the other hand has a lower cap for investment properties with a mortgage term equal to or less than 25 years while Freddie Mac does not provide this reduction.