Are you keeping up with your mortgage payments but feeling stuck because your home’s value has gone down? A government refinance program might be what you need. There are programs for homeowners who want to refinance their mortgage but find it tough because their home equity is low.
What Was the Home Affordable Refinance Program (HARP)?
HARP stands for Home Affordable Refinance Program. It was a federal program created to help homeowners who have seen a drop in their home values. The program ended in 2018.
With HARP, you could refinance your mortgage at a lower interest rate or change to a more stable mortgage plan. This program is especially helpful if you’re in a situation where refinancing seems impossible due to the decreased value of your home. HARP aims to make your mortgage payments more manageable and provide some financial relief.
HARP Replacement Programs
HARP may be expired, but here are other programs that can help you with your mortgage payment.
- Enhanced Relief Refinance (ERR) by Freddie Mac
- High LTV Refinance (HLTV) by Fannie Mae
Enhanced Relief Refinance (ERR) Mortgage
The Enhanced Relief Refinance (ERR) mortgage by Freddie Mac helps borrowers seeking to refinance into a more sustainable mortgage. This program is particularly beneficial for those looking to reduce their monthly principal and interest payments. It offers opportunities for borrowers with existing Freddie Mac mortgages who are up-to-date with their payments but have a loan-to-value ratio that exceeds the standard limits for refinance products.
Key Features of ERR
Refinance Benefits: The main goal of ERR is to provide financial relief by reducing monthly payments, offering lower interest rates, or transitioning from adjustable-rate mortgages to fixed-rate mortgages.
Eligibility Requirements: To be eligible, borrowers must have an existing Freddie Mac mortgage originated after October 1, 2017. A good payment history is essential, with no more than one 30-day delinquency in the past 12 months and no delinquencies in the last six months.
👉 Application Process: Applying for ERR involves working with your current lender or exploring other Freddie Mac-approved lenders. The process will likely require financial documentation and may involve a credit check.
Mortgage Insurance: If your current loan has mortgage insurance, it can be transferred to the new ERR loan. If there’s no mortgage insurance currently, it may not be required for the new loan, assuming all other eligibility requirements are met.
Underwriting Options: Both automated and manual underwriting options are available, offering flexibility in the application process. This is particularly helpful for borrowers who may not meet typical underwriting standards.
📕 Story Time: Jacob, a teacher in a suburban area, had a Freddie Mac mortgage with a high interest rate. The fluctuating market made his adjustable-rate mortgage a challenge. Through Freddie Mac’s Enhanced Relief Refinance, Jacob refinanced his mortgage to a lower, fixed interest rate. This change significantly reduced his monthly payments and provided him with financial stability.
Why Consider ERR?
ERR is designed for homeowners who have been consistent with their mortgage payments but are struggling due to a high loan-to-value ratio. This situation can arise if your home’s value has decreased since you purchased it. ERR offers a chance to adjust your mortgage terms to better suit your current financial situation.
ERR is a viable option for homeowners looking to improve their mortgage situation in light of changes in the housing market. You may be able to reduce your monthly payments and secure a more stable mortgage plan.
High LTV Refinance (HLTV)
Another option for homeowners is Fannie Mae’s High Loan-to-Value (HLTV) Refinance. This program is designed to help homeowners who are current on their mortgage but have a high loan-to-value ratio. This means if your home value has decreased, you may still be able to refinance and potentially reduce your monthly payments.
HLTV Key Features
HLTV Refinance is for those who have a Fannie Mae mortgage. The major benefit of this program is the possibility of lowering your monthly payments. This can happen through reduced interest rates or by changing the terms of your loan. For example, you might switch from an adjustable-rate mortgage to a fixed-rate mortgage, which can offer more stability in your monthly expenses.
📕 Story Time: Andrea, a nurse, was staying on top of her mortgage payments but found herself underwater due to her home’s value dropping. She had a mortgage owned by Fannie Mae. Learning about the HLTV Refinance option, Andrea successfully applied and refinanced to a lower interest rate. This reduction eased her financial strain by lowering her monthly payments, allowing her more flexibility and less stress in managing her day-to-day finances.
The HLTV Refinance option also includes the possibility of transferring your existing mortgage insurance to the new loan. This is important if you’re currently paying for mortgage insurance. There are both manual and automated underwriting options, which can make the process more flexible depending on your situation.
HLTV Eligibility Criteria
To be eligible, there are a few conditions:
- Your mortgage must be owned by Fannie Mae.
- The mortgage must have started after a certain date (typically October 1, 2017).
- You need a good payment history, meaning you’ve been on time with your mortgage payments.
👉 The Application Process
When applying for HLTV Refinance, you’ll work with your current lender. They’ll help you understand the specific details of the program and guide you through the application process. This might include submitting financial information and possibly undergoing a credit check.
How Did HARP Work?
HARP was a powerful program when it was active, helping over 3.5 million homeowners refinance their home loans.
HARP offered the chance to lower your interest rate by refinancing. HARP also provided an option to switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage. This switch kept monthly payments consistent, regardless of market trends.
For some, HARP also offered a chance to shorten the term of the mortgage, so they could pay off their home faster.
What Were HARP Qualifications?
To qualify for HARP, these were the key requirements.
- You must own a 1-4 unit home with a mortgage owned by Freddie Mac
- You have no missed mortgage payments for the last 6 months
- Your loan-to-value ratio should be greater than 80%
- Your mortgage must have originated on or before May 31, 2009
🌟 Next Steps
While HARP has expired, there are still options available through Freddie Mac and Fannie Mae for homeowners looking to refinance their mortgages. Programs like the Enhanced Relief Refinance by Freddie Mac and the High LTV Refinance option by Fannie Mae are designed to help homeowners lower their monthly mortgage payments and achieve more stable financial situations.
Information Needed To Apply for Refinance Assistance
The application process may vary slightly depending on your lender and loan program, but generally, you’ll need:
- Proof of income
- Information about your property
- Full details of your current mortgage
💳 Be prepared for a credit check and an appraisal of your home in some cases.
Keep in mind that you’re not limited to your current lender. You can explore options with other mortgage lenders participating in various assistance programs. This gives you a chance to compare rates and terms to find the best refinance option for your situation. Each lender might have slightly different requirements or processes for applications, so it’s wise to ask questions and understand their specific requirements.
If you’re struggling with your mortgage due to changes in the housing market or personal financial circumstances, consider exploring these options. They could provide a pathway to reduce your financial burden and help you save on your monthly mortgage payments. Seeking assistance and exploring these programs could lead to significant savings in both the short term and long term.