According to a Housing Wire article on HARP refinances, "few (of the HARP refinances) are going to borrowers who would otherwise not be able to refinance."
The numbers as reported by Freddie Mac and Fannie Mae bear this out. At Freddie Mac, only 1 percent of HARP refis were closed for homeowners who owed 105 percent or more of what their homes were worth--even though HARP allows refinancing at up to 125 percent loan-to-value. Fannie Mae wasn't any more impressive--fewer than 15 percent of borrowers with credit scores under 700 refinanced through HARP. And only 5 percent of those owing more than 120 percent of the home's value got a refinance.
So why are borrowers who don't need a HARP refinance getting them?
It appears to be a preemptive move by mortgage lenders to keep their borrowers from refinancing with another lender. So they offer HARP refis to those with very low loan-to-value ratios and excellent credit--not to the underwater folks the program was supposed to help.
If you get such an offer from your lender, don't just jump at it--they might not be offering the best mortgage rates you can get, and if you shop around you can do better. It takes very little time to find this out, especially if you make your inquiries online.
What about those who are underwater who do need to use the HARP program?
First, if you are underwater and in good standing with your mortgage lender, inquire about an FHA Short Refinance, which gets you a write-down of your principal balance and a refinance into an FHA mortgage at today's current mortgage rates. Understand that very few mortgage lenders are willing to participate in this program and you will probably not be able to refinance under it. However, it's the best deal available if you can get it so it can't hurt to ask.
Next, see if you are eligible for HARP. Check the guidelines at MakingHomeAffordable.com to find out. If your current loan has mortgage insurance, you will have to refinance with your current mortgage lender. If you are severely underwater, your choice of lenders may be limited--although the program allows up at 125 percent loan-to-value ratios, many lenders cap their HARP refinances at 105 percent.
Finally, if you are NOT in good standing with your lender and are undergoing financial hardship, you may qualify for a HAMP or other mortgage modification. The more underwater you are, the more likely your lender is to help you out with a modification.