The Federal Housing Finance Agency created the Home Affordable Refinance Program, or HARP, in 2009 to give refinance options to homeowners whose mortgage balances are higher than their property values and who are often turned away by traditional lenders. HARP helped millions of homeowners refinance their loans.
HARP is no longer be available as of Dec. 31, 2018, but there are two other refinance options homeowners can consider:
Both refinance options are meant for borrowers with high loan-to-value ratios (calculate your LTV ratio here).
Here’s a closer look at these two programs:
Why you should consider the new refinance options
Like HARP, the new refinance options can reduce the term or interest rate on your existing loan, as well as lower your overall monthly principal or interest payments. That frees up space in your monthly budget to meet other financial obligations.
“Providing a sustainable refinance opportunity for high LTV borrowers who have demonstrated responsibility by remaining current on their mortgage makes financial sense both for borrowers and for [Fannie Mae and Freddie Mac],” said FHFA Director Melvin L. Watt in a release. “This new offering will give borrowers the opportunity to refinance when rates are low, making their mortgages more affordable and thus reducing credit risk exposure for Fannie Mae and Freddie Mac.”
Refinance program eligibility
If you already have a HARP loan, you won’t be able to refinance through these programs, because you’ve already received federal mortgage relief. To be eligible, you must also:
- Have made 12 consecutive monthly mortgage payments on the loan since it became part of Fannie Mae’s or Freddie Mac’s portfolio.
- Have an LTV that exceeds the maximum allowed for other refinance products, depending on which entity owns the loan. If the loan is owned by Fannie, you must owe more than 97% of your home’s current value. If the loan is owned by Freddie, you must owe more than the maximum loan-to-value limit for a standard ‘no cash-out’ refinance mortgage, which is 95% for a single-family primary residence.
- Not have made a late payment within the past six months.
- Not have missed more than one payment within the previous 12 months.
- Have a verifiable source of income.
- Receive at least one of the following benefits from the refinance: a reduction in your monthly principal and interest payment; a lower interest rate; a shorter amortization term; or a more stable loan product (switching from an adjustable-rate mortgage to a fixed loan, for example).
Advantages of applying
These new loans have several advantages over a traditional refinance. They don’t:
- Require a minimum credit score.
- Mandate a maximum debt-to-income or loan-to-value ratio limit.
- Usually require an appraisal.
- Limit the number of times you can refinance with these programs.
- Set a loan origination cutoff requirement.
They also have a streamlined application and documentation process.
How to get help
If you want to refinance but traditional lenders have turned you away, ask Fannie Mae or Freddie Mac if you qualify once the new programs go live in October. And contact your current lender as soon as possible to explore relief options.