In the years following the housing market crisis, the Home Affordable Refinance Program (HARP) proved to be a highly effective tool in preventing mortgage defaults, with more than 3.4 million borrowers from 2009 to 2018 taking advantage of the refinancing opportunities provided by the program.  HARP offered simplified documentation, automated appraisals, no or reduced loan-level pricing adjustments, and mortgage insurance transferability without regard to the mortgage’s current loan-to-value ratio. Rigorous studies have estimated that this program, by reducing borrowers’ monthly mortgage payments, reduced the default rate on these mortgages by as much as 62 percent. Although policymakers have acted quickly to enact other forbearance programs during the COVID-19 pandemic, HARP or a similar program has not been restarted, despite its previous success.

Mortgage rates remain near historic lows, creating an opportunity for borrowers to lower their interest and monthly mortgage payments and improve their financial stability. Borrowers who have taken advantage of refinancing have tended to have high credit scores and large loans and have not suffered a job loss or income reduction. Households most affected by the pandemic’s economic effects are likely to have been locked out of refinancing opportunities. Because of historical inequities that have limited economic opportunities, these borrowers are disproportionately Black and Latino. By introducing a streamlined refinance program modeled after HARP, policymakers could address these barriers and help borrowers with low credit scores, low incomes, and small loans, who are disproportionately Black and Latino, strengthen their financial situation and avoid defaulting on their home loans.

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