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New Underwater Refinance Program Available January 2019

Craig Berry
Craig BerryThe Mortgage Reports Contributor

Rates To Stay Low, More Homeowners To Become Refinance-Eligible

According to mortgage rule-making agency Freddie Mac, 30-year fixed mortgage rates have averaged near 4% thus far in 2017. Despite dire predictions of skyrocketing rates, mortgages have remained downright cheap this year.

Now, many U.S. homeowners are taking advantage of the opportunity to refinance.

Still, many are unable due to a high loan-to-value (LTV), and ineligibility for the HARP program.

But Fannie Mae / Freddie Mac overseer, FHFA, recently announced that relief could be on the way.

A new high-LTV program will be available in January 2019. Some of the HARP restrictions will be peeled away, and more homeowners will be eligible.

Freddie Mac predicts mortgage rates will stay low through 2017; it could be another a banner year for underwater homeowners.

Verify your refinance eligibility (Oct 18th, 2018)

Reasons To Refinance In 2017

Lower rates can translate to a variety of benefits — beyond a lower payment.

These benefits will vary according to each homeowner and their particular situation.

Some reasons homeowners decide to refinance to:

  • Tap into home equity
  • Cancel mortgage insurance
  • “Fix” an adjustable rate mortgage
  • Cut their loan term from 30 years to fifteen
  • Increase cash flow on an investment property

With less stringent underwriting guidelines combined with lower interest rates and increased home appreciation, it’s no wonder that refinance applications made up nearly half of the total mortgage applications to start 2017.

In this rate environment, it’s a fantastic time to shop for a refinance.

Verify your refinance eligibility (Oct 18th, 2018)

The Final End To HARP?

The Federal Housing Finance Agency (FHFA) recently announced that it will be extending its Home Affordable Refinance Program (HARP) until December 31, 2018.

After that, the program is likely gone forever.

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.

HARP was set to expire at the end of 2017. However, with more than 300,000 eligible homeowners who have yet to take advantage of the HARP program, FHFA decided to extend the program for the fourth and probably final time.

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.

Fannie Mae High-LTV Refinance Available January 2019

The HARP program, as we know it, will end in December 2018. The program’s departure would leave a void for underwater homeowners who have not – or could not – refinance.

In response, Fannie Mae and Freddie Mac will release a new refinance option, available January 2019.

Fannie Mae does not have an official name for the program yet, and is simply calling it the “High Loan-to-Value Refinance Option.” Freddie Mac, however, is branding its program the “Enhanced Relief Refinance.”

This new program, much like HARP, will allow underwater homeowners to refinance their mortgages and take advantage of low mortgage rates.

The program will come with some enhancements, though. Homeowners can use it more than once. Today’s version of HARP is a single-use program.

Additionally, there will be an updated cut off date. HARP requires the homeowner to have opened the loan before June 1, 2009. That was more than eight years ago; there aren’t many mortgages that old anymore.

The enhanced high-LTV program will change that date requirement. The new program requires loans to be originated on or after October 1, 2017.

Unfortunately, the new program will not assist homeowners with a loan that started between June 2009 and September 2017. That segment must still find a traditional refinance program to reduce their payment.

To be eligible for the new program starting 2019, homeowners must obtain better loan terms, such as:

  • A lower interest rate
  • Reduction in their monthly principal and interest payment
  • A shorter loan term
  • A fixed rate to replace an adjustable-rate mortgage
Verify your refinance eligibility (Oct 18th, 2018)

Additional Requirements for the Fannie Mae High-LTV Program

Homeowners will need to meet certain eligibility requirements in order to take advantage of this new high LTV refinance option.

There won’t be any loan-to-value limits. Homeowners who are severely underwater will still be eligible.

However, Fannie Mae loan holders will need at least a 95% LTV or higher.

In addition:

  • The new loan must have an origination date of October 1, 2017 or later
  • At least 15 months must pass before the homeowner is eligible to refinance with this loan
  • The mortgage must be owned by Fannie Mae

In other words, add 15 months to your loan start date and that’s when you can refinance. But this only applies if your loan started after October 1, 2017.

Many trade groups have been calling for HARP 3.0, which would eliminate the Fannie Mae ownership requirement.

For now, it appears this rule will remain in place.

However, the loan appears to be adopting major points of HARP 3.0, namely an update of the loan cutoff date and the ability to use the program again and again.

One key point, however, is that the new program cannot be used to refinance a HARP loan. Someone who had a HARP loan in the past but has since refinanced with a different Fannie or Freddie loan is eligible.

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

One of the more interesting features released by FHFA is “Simplified documentation requirements for employment, income, and assets.” It’s not clear — yet — what this means, exactly. It could mean that no paystubs, W2s, tax returns or bank statements will be required.

What’s more likely however, is a requirement for limited documentation. Borrowers may have to turn in one pay stub and a W2, for instance, plus 60 days’ worth of bank statements.

More details will be released later this year. The full guidelines may reveal more surprises. For now, it’s wait-and-see.

Freddie Mac High-LTV Program

Fannie Mae’s sibling, Freddie Mac, also unveiled its own version of the high loan-to-value refinance program.

Freddie’s high LTV option will be known as the Enhanced Relief Refinance.

For the most part, Freddie Mac’s version will mirror the Fannie Mae program. One difference, however, is the minimum LTV requirement — 97% compared to Fannie’s 95%.

For instance, a homeowner with a Freddie Mac loan whose home is worth $100,000 could use the refinance if they have a loan balance of at least ninety-seven thousand dollars. A Fannie Mae loan holder’s minimum would be $95,000. In this way, the Freddie Mac program is slightly more restrictive.

The more fundamental difference between the two programs, though, is that the homeowner’s mortgage must be an existing Freddie Mac loan.

Homeowners can check their loan’s ownership on Fannie Mae and Freddie Mac’s loan lookup website.

The Enhanced Relief Refinance Program will replace Freddie Mac’s version of HARP, called the Relief Refinance Program or Open Access.

What Are Today’s Refinance Rates?

With mortgage rates predicted to remain at historically low levels through the end of 2016, there are lots of reasons for homeowners to consider refinancing.

Find out today’s refinance rates. No social security number is required to start, and all rate quotes come with access to your live mortgage credit scores.

Verify your refinance eligibility (Oct 18th, 2018)