If you were one of the people who depended on the Home Affordable Refinance Program (HARP), then you must be pretty bummed that it expired in 2018. HARP was a federal government program that helped individuals and families who had limited equity and income. If you find yourself with limited equity and income, then you should read this article. The Home Affordable Refinance Program is not the only federal government program out there. Thanks to Freddie Mac and Fannie Mae, there are two alternative programs that serve the same purpose as the HARP.
There are currently two available programs that operate as alternatives to the HARP. These programs are the Fannie Mae “High LTV Refinance Option” (HIRO) and the “Freddie Mac Enhanced Relief Refinance” (FMERR). Unlike the COVID-19 stimulus program, these programs serve permanent mortgage relief. For novices out there, you are probably thinking “what the heck is the Home Affordable Refinance Program?” This article will tell you everything about the used-to-be HARP and the two current refinance programs. Additionally, you will find information on the eligibility requirements for both programs and how you can apply for it.
What is the Home Affordable Refinance Program?
HARP stands for the Home Affordable Refinance Program. This program was available to a variety of qualifying individuals. However, it was extra helpful for seniors with limited equity and limited income. The Home Affordable Refinance Program was established as a government program in 2009. The Program was created by the Federal Housing Finance Agency (FHFA). This was a response to the 2007-2008 financial crisis.
Its purpose was to assist homeowners refinance loans on residential properties, which were worth less than its outstanding mortgage. By the end of the program, there were approximately 3.45 million borrowers who took advantage of the benefits. (Federal Housing Finance Agency )
The Home Affordable Refinance Program aimed at families and individuals with a loan-to-value ratio (LTV) that was greater than 80%. These families and individuals have faced issues, when it comes to securing refinancing. This could be because of lack of equity in their homes. That they cannot gain any benefit from interest rates. The Home Affordable Refinance Program was originally scheduled to end at the end of 2016. But, the government extended the HARP program by two years, expiring in December 2018.
Understanding Home Affordable Refinance Program
This program allowed you to refinance your mortgage, for either a lower interest rate or a lower monthly payment. This option is only possible for homeowners that don’t have much equity in their home. But, these homeowners must be responsibly up-to-date on their payments. An applicant that was refinanced through the HARP program could be able to save thousands over the course of their loan.
If you were a homeowner interested in HARP, your current mortgage will need to be financed under Freddie Mac or Fannie Mae. In the case that you have repeated delinquencies on your loan within the past year, and have a loan-to-value (LTV) ratio of over 80%, then you would have been ineligible.
Luckily, eligibility opportunities have become more inclusive over the years. This means if you applied previously and were denied, you could have been eligible. A lot of strict guidelines and older risk fees were updated or removed, which made the Program more accessible. For example, prior LTV rates were set at 125% but after 2009, the program accepted applicants with homes at almost any value. The only condition is that you are able to provide responsible, on-time payments.
This program was only available for a specific timeframe. For example, if your goal is to refinance this year, then you can apply for a Freddie Mac or Fannie Mae Program. Unfortunately, you will not be able to apply for the Home Affordable Refinance Program, since it expired in 2018.
After its Expiration, What’s Next?
Although the Home Affordable Refinance Program has expired, there are two alternative programs with the same purpose. Freddie Mac and Fannie Mae are two government-supported enterprises that purchase mortgages and resell them for affordable prices. These enterprises aim to help people with high loan-to-value ratio (LTV) ratios. This means that, of the overall housing unit’s appraised value, the homeowners own a small part of it. Lenders tend to use the LTV ratio to determine the amount of risk it would be to lend to someone. Individuals and families with a high loan-to value ratio are considered a high risk for lenders.
That is why Freddie Mac and Fannie Mae have created two refinance programs that provide mortgage relief for people with high loan-to-value ratios. The two programs aim to help those who have a too high LTV ratio that prevents them from receiving a traditional refinance from a lender. “[These programs are] able to help more people to refinance, whereas before with HARP, it was just for people underwater,” Foguth says. “It’s really a lot better for the housing market.” (Moore)
High LTV Refinance Option
The first program that you should consider for mortgage relief is The Fannie Mae High LTV Refinance Option (HIRO). This program aims to assist homeowners who want to refinance in today’s low mortgage rate, but you might not have enough equity. The Fannie Mae High LTV Refinance Option (HIRO) helps homeowners who did not receive benefits from the rising home values in the past few years. If you are stuck with the high housing rates, then you can always benefit a thing or two from the HIRO program.
There are conditions that you need to meet for the HIRO program. One of the conditions is that you have to have bought a housing unit since late 2017. You will always need to have put a small down payment on the housing unit. Borrowers that have next-to-nothing or no equity will significantly benefit from the HIRO program. In addition, this program can help underwater borrowers. Underwater borrowers are families and individuals who owe more on their housing units than its actual worth.
One of the main issues that low-equity borrowers face is that they might be trapped with high-cost mortgages that cannot be refinanced in this day and age. The High LTV Refinance Option Program allows homeowners to gain access to a lower rate and more affordable mortgage payments.
How to be Eligible for the High Loan-To-Value Refinance Option
Similar to many government programs, you will need to meet certain requirements to be eligible for the HIRO program. The High LTV Refinance Option program requires for you to meet the following conditions:
- You’ll need to currently have a Fannie Mae-backed mortgage. If you are unsure if Fannie Mae supports your loan, then you can find out from Fannie Mae’s Lookup Tool.
- Your mortgage must originate on or after October, 1st, 2017.
- Make sure you have your mortgage held for at least 15 month (one year and three months) before you apply for the HIRO Program.
- You must not have any late payments for more than 30 days in the past six months.
- Make sure you have not made more than one payment up to 30 days late in the past year.
- You must have made no payments greater than 30 days late.
Additionally, the HIRO program should have a “net tangible benefit” for you. This means that the loan must lead to at least one of the following benefits:
- A reduced principal and interest payment per month
- Lower interest rates.
- Short amortization term
- A more stable mortgage product (no adjustable-rate mortgages)
You should keep in mind that the High LTV Refinance Option aims to help good borrowers with little or no property value. If you have “too much” equity, then you will not be eligible for the Fannie Mae program. (Miller)
Enhanced Relief Refinance Mortgage
As for the Freddie Mac Program, or the Freddie Mac Enhanced Relief Refinance (FMERR), this program works a little differently. This program focuses on homeowners who have done everything right, but still get the short end of the stick. FMERR aims to help those who have yet to benefit from the rising value of housing units. Despite the increase in real-estate values, the reality is that the sale prices in some areas are rapidly declining. With declining prices, that means less equity. This leaves you with higher mortgage rates and monthly payments that you cannot afford. It also leaves you ineligible to receive traditional loans.
With the Freddie Mac Enhanced Relief Refinance Program, you will be able to refinance your home loan at current interest rates. (Yes, even with next-to-nothing equity.) You can even refinance your home loan while your home’s value is lower than your outstanding debt. For traditional loan programs, you will find that they are a stickler about LTV ratios, but Freddie Mac ignores the maximum LTV ratios.
How to be Eligible for Enhanced Relief Refinance Mortgage
Freddie Mac Enhanced Relief Refinance Program focuses on helping underwater homeowners. This program is very beneficial for homeowners who are struggling to refinance their home loans. However, similar to the Fannie Mae HIRO Program, you will need to meet the requirements to be eligible. The requirements are the following:
- Freddie Mac must own your current mortgage. If you are unsure whether Freddie Mac owns your mortgage, then you can find out by using Freddie Mac’s Loan Lookup Tool.
- Your loan-to-value ratio or LTV must be at least 97.01% for an owner-occupied residence for one unit.
- You need to have a current loan that you have acquired recently. By recently, we mean that it must have originated on or after November, 1st, 2018.
- The start date and end date of your current loan must be at least fifteen months apart.
- Make sure you do not have any late payments for more than 30 days in the past six months.
- Make sure you have not made more than one payment up to 30 days late in the past year.
- You must have made no more than one payment up to 30 days late in the past year.
You’ll need to keep in mind that it is okay if you have next-to-nothing or no home equity at all. You will still be an eligible candidate for the Freddie Mac Enhanced Refined Refinance program. (That is the sort of thing that they are looking for in the FMERR Program, anyways.) (Miller, FMERR 2021 guidelines and eligibility: The Freddie Mac Enhanced Relief Refinance Program)
In conclusion, you should not worry that the Home Affordable Refinance Program is expired. You can take part in two current programs, as an alternative option. These two programs are: Freddie Mac Enhanced Relief Refinance Program (FMERR) and the Fannie Mae High LTV Refinance Option Program (HIRO). These two programs offer permanent mortgage relief to homeowners who have little to no home equity. With the understanding that there are homeowners who do not benefit from the rising value in homes, Freddie Mac and Fannie Mae aim to help them get back on their feet. There has been no set expiration date on both programs.
It is not easy to watch those around benefit from something that you should gain from, too. But, the truth is, that not everyone has the same situation. (This has nothing to do with luck. Okay, maybe it has a little to do with luck.) Do not worry, though, help is just around the corner. Just make sure that you meet the criteria, so that you can be eligible for the programs. One of the similar conditions for both programs revolves around late payments. You need to make sure that you do not have any late payments for more than 30 days in the past six months. Also, you must have made no more than one payment up to 30 days late in the past year.
Federal Housing Finance Agency . HOME AFFORDABLE REFINANCE PROGRAM (HARP). 31 12 2018. 01 07 2021 <https://www.fhfa.gov/PolicyProgramsResearch/Programs/Pages/HARP.aspx>.
Miller, Peter. FMERR 2021 guidelines and eligibility: The Freddie Mac Enhanced Relief Refinance Program. 01 04 2021. 03 07 2021 <https://themortgagereports.com/48757/freddie-mac-enhanced-relief-refinance-fmerr-guidelines-rates-benefits#program>.
—. HIRO Mortgage Program 2021: High LTV Refinance Option. 01 07 2021. 03 07 2021 <https://themortgagereports.com/48901/fannie-mae-high-loan-to-value-ltv-refinance-option-hlro-guildelines-rates-eligibility#qualify>.
Moore, Taylor. HARP Replacement Programs: Know Your Options. 30 03 2021. 03 07 2021 <https://time.com/nextadvisor/mortgages/va-loan-rates/>.