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HARP Replacement Programs in 2019 for Underwater Borrowers

Is it Bad to Refinance Your Home Multiple Times

The Home Affordable Refinance Program, or HARP, was created in the wake of the housing crisis to help homeowners refinance upside down loans and avoid foreclosure. HARP ended in 2018, but HARP replacement programs available in 2019 now offer new refinance options for homeowners in distress.

In this article, we’ll discuss:

What was HARP?

The Home Affordable Refinance Program, or HARP, was created by the Federal Housing Finance Agency (FHFA) in 2009 to help struggling homeowners keep their homes and refinance upside down loans. Before the program was created it was virtually impossible to refinance a mortgage if the loan balance exceeded the home’s value due to lending guidelines. HARP expired in 2018.

In its place, HARP replacement programs from Fannie Mae and Freddie Mac (which fuel the U.S. mortgage market) help underwater homeowners achieve one or several of the following refinance goals:

  • A lower payment
  • A lower interest rate
  • A shorter term
  • A more stable loan product

HARP replacement programs in 2019

There are two conventional loan programs that replace HARP: the Fannie Mae High Loan-to-Value Refinance Option and the Freddie Mac Enhanced Relief Refinance (FMERR). Here’s an overview of each:

The Fannie Mae High LTV Refinance Option. Fannie Mae is a government-sponsored enterprise that buys mortgages, and homeowners with a loan serviced by Fannie Mae may be eligible for the Fannie Mae High LTV Refinance Option.

Freddie Mac Enhanced Relief Refinance (FMERR). Freddie Mac is another government-sponsored enterprise similar to Fannie Mae. The Freddie Mac Enhanced Relief Refinance was created to help underwater borrowers who currently have a Freddie Mac serviced loan. Freddie Mac’s website indicates the program expires in October 2019, but LendingTree spoke to a Freddie Mac representative who indicated the program is available until further notice.

Benefits of HARP replacement programs

If you live in an area of the U.S. with a higher share of negative equity, you may benefit from the HARP replacement programs. Negative equity is a measure of the difference between your loan balance, and your home’s value. For example, if your house is worth $160,000 but you owe $200,000, then you have 25% negative equity.

The following are some of the features of the new programs that make saving money on an underwater mortgage refinance worthwhile:

Unlimited use. Mortgage rates tend to rise and fall throughout the years, and the original HARP program only gave you one shot at a lower rate for the life of the loan. The new HARP replacement programs allow refinancing as often as it makes financial sense.

Mortgage insurance transfers. Mortgages on homes purchased with less than a 20% down payment typically require private mortgage insurance (PMI). Even if your value has dropped, you won’t need higher mortgage insurance — the current PMI will transfer to the new loan.

No new PMI. If you don’t have PMI now, it won’t be required on the new loan, even if you have less than 20% equity or negative equity.

Less documentation required. Lenders are not required to document income or assets.

No minimum credit score or maximum DTI limit. Lenders only review mortgage payment history. Even if you’ve racked up debt or have seen a drop in your credit score, you may still qualify because lenders don’t analyze your debt-to-income ratio (DTI), a measure of your total monthly debt compared to your gross monthly income.

You may get an appraisal waiver. Depending on the location of your home and the results of a computer value analysis, an appraisal may not be required. That can save you $300 to $400, which is the average cost of a home appraisal.

Waiting periods for major derogatory credit events don’t apply. The standard waiting periods for bankruptcy discharges and foreclosures may not apply to the HARP replacement programs. However, your credit scores need to be high enough to get a reasonable interest rate to make the refinance beneficial.

HARP replacement program requirements

Wondering if you are eligible for these programs? The following is a checklist of approval requirements:

You’re eligible for the Fannie Mae High LTV Refinance Option if: You’re eligible for the Freddie Mac Enhanced Relief Refinance Mortgage (FMERR) if:
  • You currently have a Fannie Mae serviced loan.
  • The note date on your current loan is after Oct. 1, 2017.
  • It’s been at least 15 months since you took out your current mortgage.
  • You haven’t been late on your mortgage payment in the last six months.
  • You’ve only had one late payment in the last 12 months.
  • You don’t have more than 3% equity (for a single-family primary residence).
  • You’re not eligible if your current loan was already refinanced under HARP.
  • You currently have a Freddie Mac serviced loan.
  • It’s been at least 15 months since you took out your current mortgage.
  • You haven’t been late on your current mortgage in the last six months.
  • You haven’t been late more than once on your current mortgage in the last 12 months.
  • Not eligible if current loan was already refinanced under the old HARP.

How do I apply for a HARP replacement program?

There are four steps to determine eligibility for Fannie mae’s High LTV refinance program or Freddie Mac’s Enhanced Relief Mortgage:

  1. Confirm that your current loan is serviced by Fannie Mae or Freddie Mac. Here’s how to do it:
  1. Estimate the value of  your home. Use a home value estimator to get a rough idea of your home’s worth. You can’t have more than 3% equity in your home to be eligible, and there is no limit on negative equity as long you apply for a 30-year fixed conventional mortgage.
  2. Use a comparison rate tool or mortgage refinance calculator. Not all lenders offer HARP replacement programs. A mortgage rate comparison tool can save time since you’ll only be contacted by lenders who can make you offers based on the information you input.
  3. Compare loan estimates to what your current lender offers: Your current lender may be willing to make a competitive offer to keep you as a customer. Once you’ve compared all of the figures, choose the option with the lowest rates and fees.

Other ways to refinance an upside-down mortgage

There other options for refinancing a home with an upside-down mortgage, even if your current mortgage isn’t held by Fannie Mae or Freddie Mac. Here’s a look at some of those programs:

FHA streamline refinance
If you currently have an FHA loan, you may qualify for the FHA streamline refinance program. There’s no appraisal or income verification and lenders won’t evaluate how much equity is in your home. Only your mortgage payment history is considered for approval, and there is no minimum credit score requirement.

Veterans of the armed forces or active-duty military personnel with a current VA loan guaranteed by the U.S. Department of Veterans Affairs may be eligible to refinance under the VA interest rate reduction refinance loan guidelines (IRRRL). Income doesn’t need to be verified, there’s no minimum credit score and no appraisal is required.

Mortgage modification
If you don’t meet any of the criteria for HARP replacement programs or government streamline refinance loans, contact your current lender and request information about a mortgage modification. The lender’s servicing department may be able to reduce your payment by extending the term of your loan, or temporarily lower your monthly payment.

Mortgage recasting
If you’ve come into a large sum of money, you can use it to pay down your loan balance and ask the lender to recast your mortgage. This means your mortgage payment is adjusted based on the new balance, effectively lowering your payment without going through a full refinance.

States with most negative equity

Below is a list of states with the largest share of negative equity as of the second quarter of 2019, according to CoreLogic. If your home is located in a state that has a “high” or “very high” share of negative equity, you might benefit from a HARP replacement program sooner rather than later.


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