Great news for U.S. homeowners! The Federal Housing Finance Agency recently announced that it will extend the Home Affordable Refinance Program (HARP), one of the most successful home refinance programs in U.S. history, by several more months, making it available until September 30, 2017. Unfortunately, this is the last HARP extension ever. But, don’t worry, the FHFA, Freddie Mac and Fannie Mae also announced that they have another surprise planned for homeowners.
What is HARP?
The Federal Housing Finance Agency launched the program in 2009. Nicknamed the Obama mortgage program, its mission was to help homeowners who are underwater on their mortgages due to the last housing crash.
At first, it was available only to those with a loan-to-value (LTV) ratio of 105%. But this rule soon changed and many other HARP eligibility requirements were also dropped. The updated program had no limit on negative equity for mortgages up to 30 years. It accepted homeowners with PMI on their loan, allowed refinancing for all occupancy types, and it also enabled homeowners to go to any lender to refinance.
The federal mortgage program has so far helped more than 3.4 million homeowners. In fact, the FHFA announced that there are currently only about 300,000 borrowers still eligible for the program. HARP 2.0 was and still is a great success. Unfortunately, it won’t be followed by a HARP 3.0. Instead, the FHFA, Freddie Mac and Fannie Mae will offer U.S. homeowners a whole new refinance product.
A new refi product to replace HARP
HARP received this new extension in order to create a smoother transition period for a new refi product the FHFA plans to launch in October 2017. The new product will help borrowers with high LTV ratios. It will provide much-needed liquidity for homeowners who are current on their mortgage but are unable to refinance through traditional programs because their LTV ratio exceeds the Freddie Mac and Fannie Mae maximum limits.
“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,” FHFA Director Melvin L. Watt said in a statement.
What you need in order to qualify for the new program
In order to qualify for the new offering, U.S. borrowers must:
- not have missed any mortgage payments in the previous six months;
- not have missed more than one payment in the previous 12 months;
- have a source of income;
- receive a benefit from the refinance such as a reduction in their monthly mortgage payment.
More details about the program will be released in the following months.
Just like HARP, the new offering does not require a minimum credit score, it has no maximum debt-to-income ratio or maximum LTV. But, unlike HARP, there are no eligibility cut-off dates. Additionally, borrowers will be able to use it more than once to refinance their mortgage. Borrowers with existing HARP loans are not eligible unless they have refinanced out of the program using one of the Fannie Mae or Freddie Mac traditional refinance products.