HARP Replacement Programs: Know Your Options

Wendy WilsonAugust 24, 2021

Refinancing your home can offer you a way to pay less interest on your homeowner loan and reduce your monthly payments.

Unfortunately, the situation many homeowners find themselves in is that they are not eligible for traditional refinancing because they either have no equity or are “underwater”.

This is a frustrating position as it feels like there is no way of ever improving your situation.

HARP offered a solution to homeowners in this position.

When it ceased to exist, people were again left feeling like they had very few options available to them.

Thankfully, the new Fannie Mae and Freddie Mac refinance programs can help borrowers with high LTVs to refinance their property at a lower interest rate.

What Was HARP and When Did It End?

The Home Affordable Refinance Program was brought to an end on December 31, 2018.

When it started in 2009, its purpose was to help homeowners with a good history on their existing mortgage, but who had little to no equity, get lower mortgage rates.

This was made necessary as a result of the U.S. housing market crash.

Homeowners were struggling to keep up with mortgage payments but couldn’t sell as they were finding themselves in negative equity.

What Are FMERR and HIRO?

The FMERR home loan program and the Fannie Mae High LTV program replace the Home Affordable Refinance Program that operated from 2009-2018.

FMERR

The FMERR is the Freddie Mac Enhanced Relief Refinance program.

HIRO

HIRO is the other main HARP replacement program, and it stands for the Fannie Mae High Loan-to-Value Refinance option.

What Do They Do?

Fannie Mae and Freddie Mac are Enterprises created by Congress in order to bring both stability and affordability to the mortgage market.

They buy mortgages from lenders and either hold them or sell them as mortgage-backed securities. This frees up money for the lenders to engage in further lending.

They both provide refinancing options to those who already have mortgages with either Fannie Mae or Freddie Mac and owe more than 97% of their home’s value.

Traditional refinance options require you to have at least 3% equity before they will even consider you.

Using one of the two programs, you may be able to refinance your mortgage even if you owe more than it is currently worth (i.e. you’re in negative equity).

These refinance options are available to homeowners who wouldn’t ordinarily qualify for standard refinance programs because of how much they owe against the value of their home.

Why Should You Consider Using HARP Replacement Options?

Using either the Freddie Mac or Fannie Mae HARP replacement refinancing options can help you to decrease the term of your existing loan.

It may also reduce your overall monthly payments as well as lowering the amount of interest you pay both monthly and throughout the term of the loan.

This is therefore going to save you money every month that can be used in other ways, such as paying off other debt or providing you with some disposable income.

It can be incredibly demoralizing to feel like you’re stuck paying a mortgage without ever making any progress in paying off the loan.

Looking into the new Fannie Mae and Freddie Mac refinance programs gives you options again.

FMERR and High-LTV Refinance Program Eligibility

To be eligible to apply for refinancing under the program, you must:

• Have a loan owned by Fannie Mae or Freddie Mac with a note date on or after October 1, 2017. You can check your eligibility using either the Fannie Mae or Freddie Mac lookup tool.
• Owe more than 97% of the home’s value (if it is a single-family home and your primary residence). This refinancing option is available only to homeowners with high loan-to-value ratios. If you owe less than 97%, you may qualify for traditional forms of refinancing.
• Have had no late payments within the last six months
• Have no more than one missed payment over the last 12 months
• Have a stable and predictable income
• Be in receipt of at least one of the following benefits from refinancing: a reduction in the monthly principal and interest payment, a lower interest rate, a shorter loan term, or a more stable loan product (i.e. moving to a fixed-rate mortgage)

Advantages Of Applying For A High-LTV Refinance

There are a number of advantages that come with applying for a high-LTV loan over a traditional refinance. These are that:

• They don’t require a minimum credit score
• They don’t mandate a maximum debt-to-income or loan-to-value ratio limit for fixed-rate loans. I.e. even if your mortgage is $200,000 and your home is only worth $175,000, you could still refinance even though the loan-to-value is 112.5%.
• They have a streamlined application and documentation process. There’s no need to prove your income and assets.  
• It helps homeowners to get out of the trap of feeling stuck paying above-market mortgage rates but having no refinance options. This helps qualifying borrowers to pay less on their mortgage every month and make it more affordable and inevitably avoid foreclosure.
• You don’t have to pay for new mortgage insurance when you refinance this way. This can help to save you more money on your monthly mortgage payment.

How To Get Help

Do you think you could benefit from the new Fannie Mae or Freddie Mac refinance programs?

If you’ve been turned away by traditional lenders, or don’t think you would be eligible, you can ask Fannie Mae or Freddie Mae.

They will tell you if you qualify for one of the HARP replacement programs.

You can also contact your current lender to see if they have any options for you to explore in mortgage relief.