HARP replacement: Agencies launch new underwater refi programs – “High LTV” and “FMERR” refinances

Gina Pogol
The Mortgage Reports contributor

New HARP replacement starts now (this article was updated 12.19.2018)

The Federal Housing Finance Agency (FHFA) announced that it will end its Home Affordable Refinance Program (HARP) on December 31, 2018.

HARP was launched in 2009 as a way for homeowners who are current on the existing mortgage loan but have little or no equity, to take advantage of low mortgage rates.

According to FHFA, HARP-eligible homeowners can save approximately $2,400 per year on their mortgage payments. Some could save much more.

For those who are not currently eligible, the new high-LTV program could help.

Verify your eligibility for HARP replacement programs here. (Oct 22nd, 2019)

In this article:

  • The Home Affordable Refinance Program (HARP) is retiring on December 31, 2018
  • Both Fannie Mae and Freddie Mac are replacing HARP with high-LTV refinances
  • Those who could not use HARP may find themselves eligible for refinancing under the new program

HARP replacement applications accepted November 1, 2018

The new programs will be called “High LTV Refinance Option” (Fannie Mae) and the “Freddie Mac Enhanced Relief Refinance” or “FMERR”. While the first loans must close on or after January 1, 2019, lenders can begin taking applications on November 1, 2018. Here are some fast facts about the HARP replacement programs:

  • You can refinance with these programs more than once. However, you can’t refinance a HARP mortgage to either of these HARP replacement programs
  • The cutoff date is different from the original HARP, which only allowed loans originated before June 1, 2009. The replacement loans can refinance only mortgages originated on or after October 1, 2017
  • Unfortunately, homeowners with a loan that started between June 2009 and September 2017 won’t be eligible and must refinance with a standard program
  • You must use the Fannie Mae option if your current loan is with Fannie Mae, and the Freddie Mac loan if your existing mortgage is with Freddie Mac
  • The new loans must close on or after January 1, 2019

The new loan has some benefits.

Benefits of the new program

According to Fannie Mae’s announcement dated December 19, 2018:

  • Mortgage insurance (MI), if you have it, must be transferred to the new loan. But if you don’t currently have MI, you won’t need it for the new loan.
  • Simplified documentation requirements mean you may not have to prove income, assets or liability information. There is also no minimum credit score or maximum debt-to-income ratio
  • Both electronic and manual underwriting options are available to the same or a new servicer (meaning you can shop for the best rate on your high-ltv mortgage).

These loans should be much faster and easier to process than standard refinances.


Only existing mortgages that can be improved with a refinance are eligible. The new mortgage must offer at least one of these benefits:

  • Interest rate reduction
  • Lower monthly principal and interest payment
  • Shorter loan term
  • Replacement of an adjustable loan with a fixed-rate mortgage
Verify your high LTV refinance eligibility (Oct 22nd, 2019)

In addition, homeowners:

  • Must have made at least 12 on-time payments
  • Must have had no payments 30 days late in the previous six months
  • No more than one 30-day late payment in the past year

Loans with 60-day late payments (or worse) in the last year are ineligible.

Loan-to-Value (LTV) guidelines for both programs

Fannie Mae guidelines say that borrowers must owe more than 97 percent of their home’s current value for primary, single-family residences. Borrowers can also refinance multi-unit homes, second homes and investment properties under the program, with lower minimum loan-to-value requirements:

  • 2-unit primary residence: LTV must exceed 85 percent
  • 3-4 unit primary residence: LTV must exceed 75 percent
  • 1-unit second home: LTV must exceed 90 percent
  • Investment property 1-4 units: LTV must exceed 75 percent

These guidelines shouldn’t affect most applicants, because if their LTV is lower than these minimums, they should be able to refinance in the normal way.

Freddie Mac’s information sheet simply says that, “The LTV ratio for the new mortgage must exceed the maximum LTV limit for a Freddie Mac standard ‘no cashout’ refinance mortgage.” In other words, if your home’s LTV ratio is low enough for you to be eligible for a standard Freddie Mac refinance, you can’t use the Enhanced program.

Currently, these maximums are:

  • Single-family primary residence: 95 percent LTV
  • 2-unit primary residence: 85 percent LTV
  • 3-4 unit primary residence: 80 percent LTV
  • Second home: 90 percent LTV
  • 1-unit investment property: 85 percent LTV
  • 2-4 unit investment property: 75 percent LTV

So if the loan balance on your primary single-family residence exceeds 95 percent of the current property value, you are eligible for the Enhanced program. if not, you have to apply for the standard refinance.


If your loan application can be underwritten electronically (as in most cases), you may be eligible for an appraisal waiver. That means you won’t have to pay for an appraisal.

Per Fannie Mae: “For certain loan casefiles, DU will offer an appraisal waiver — an option to deliver the loan to Fannie Mae without an appraisal. Otherwise, an appraisal with an interior and exterior inspection is required. If an appraisal is obtained, it must be used for valuation even if a waiver is offered by DU.”

DU refers to Desktop Underwriter, Fannie Mae’s automated underwriting software. So don’t let anyone order an appraisal unless you are sure that you did not receive a waiver.

What about mortgage insurance?

Both programs indicate that if you already have mortgage insurance, it must be transferred to the new loan at the same coverage rate. If you currently don’t have MI, you won’t need to obtain and pay for it.

If you have lender-paid mortgage insurance (LPMI), your coverage can also be transferred.

Guidelines for one national mortgage insurer (Genworth) specify that it will continue to insure mortgages, including High-LTV Refinances, that meet Fannie Mae’s guidelines. So it appears that mortgage insurers won’t stand in the way of your refinance under these programs.

Application and documentation — no minimum credit score!

Both programs merely state that documentation for income, assets and employment will be “simplified.” Which could mean very different requirements, depending on the borrower profile — credit score, loan-to-value, debt and assets.

Fannie Mae guidelines state that, “There is no minimum credit score requirement except for loans underwritten under the Alternative Qualification Path.”

Interestingly, Fannie Mae’s FAQ section for lenders answers this question: “If a lender obtains income, assets, or liabilities either in error or as a result of originally obtaining that data as part of a traditional refinance, is it their responsibility to deliver that data, and could it affect a borrower’s eligibility for the high LTV refinance option?”

That suggests that you are better off not providing any more information than requested, and the lender may not request much.

Automated underwriting

Both programs primarily use their automated underwriting software programs to underwrite these refinances, but also indicate that they will accept manual underwriting when warranted — such as for victims of identity theft or those with little-to-no credit history.

Usually, the automated systems determine the required documents after analyzing the application and calculating its risk. You may need nothing more than confirmation that you’re still working at your job. Or you may be asked to supply a pay stub and bank statement.

What are today’s high-LTV refinance rates?

Refinance rates are subject to the ups and downs of the economy, and can even change more than once a day. In addition, they can vary from lender-to-lender by .25 to .5 percent. So shopping and comparing offers is pretty important. That’s easy to do here by completing one simple form.

Verify your refinance eligibility (Oct 22nd, 2019)