Home Underwater? HARP Extension and New Refi Programs Could Help

The Federal Housing Finance Agency (FHFA) recently made two important announcements that underwater homeowners should be aware of. First, the Home Affordable Refinance Program, or HARP, which was set to expire in December, has been extended to September 30, 2017.

What Is HARP?

HARP was created for the specific purpose of helping underwater and near-underwater homeowners refinance their mortgages. These homeowners are current on their mortgage payments but have little or no home equity, and their loan must have originated on or before May 31, 2009. Other basic requirements are outlined at HARP.gov.

A mortgage is considered underwater when the balance of a mortgage loan is higher than the property’s fair market value. Unfortunately, this happened quite a bit after the housing bubble burst and homes lost significant value, especially for homeowners who were victims of predatory lenders and got stuck with unreasonable rates. Although thousands of homes were lost to foreclosure, many of these homeowners are still underwater.

The FHFA estimates that more than 300,000 homeowners across the country are still eligible for refinancing through HARP, and interest rates are still near historic lows. The HARP extension is intended to ensure that this refinance option remains available while providing a seamless transition to new refinancing options that were also announced by the FHFA.

New High Loan-to-Value Refinance Programs on the Way

Beginning in October 2017, Fannie Mae and Freddie Mac will offer a refinance program that has two key differences from HARP: There will be no requirement that the loan originated on or before May 31, 2009. As a result, a homeowner can utilize the program more than once.

To qualify for the new refinance program, homeowners must have made all of their payments on time for the past six months and must not have missed more than one payment in the past 12 months. They must also have a source of income and receive some kind of benefit by refinancing.

Typically, this benefit is a lower mortgage payment, a lower interest rate, a shorter amortization term, or a more stable mortgage program. For example, a fixed-rate mortgage is more stable than an adjustable-rate mortgage.

Borrowers who take advantage of the new refinance program will not be subject to a minimum credit score and, in many cases, an appraisal will not be required. Borrowers with existing HARP loans are not eligible for the new program unless they’ve refinanced out of HARP using a traditional Fannie Mae or Freddie Mac refinance product.

These Programs Could Provide the Life Ring You’ve Been Waiting For

We understand that this is a lot of information to absorb. Also, Freddie Mac and Fannie Mae have slightly different eligibility requirements. The most important facts to take away from the FHFA announcement are that HARP will be available for another year, and it will be replaced by an even better program for underwater homeowners.

If you owe more than your home is worth, don’t just assume you won’t be able to refinance. Let’s sit down and discuss all of the options, including the newest programs announced by the FHFA. We’ll walk you through the eligibility requirements and help you determine the best path forward.