HARP replacement programs: 2021 Refinance options

Gina Pogol
The Mortgage Reports contributor

HARP replacement programs for underwater homeowners

The Home Affordable Refinance Program (HARP) was created in the wake of the housing crisis as a way for homeowners with little or no equity to refinance.

Fortunately, home values have been increasing steadily in recent years. And the number of underwater homeowners has fallen sharply. As a result, millions of homeowners are eligible to refinance at today’s low rates.

Even if you had an underwater loan in the past, it’s worth re-checking your eligibility. You might be surprised how much equity you’ve gained in the past year.

Verify your refinance eligibility (Sep 21st, 2021)

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Is there a HARP replacement program for 2021?

HARP expired in 2018. Since then, other programs have been created to help homeowners refinance with little or no equity. These include the Freddie Mac Enhanced Relief Refinance, the Fannie Mae HIRO program, and the Streamline Refinance for FHA, VA, and USDA loans.

But as real estate values continue to increase, there’s less and less need for these HARP replacement programs.

Many homeowners don’t realize their equity has increased. But rising property values benefit homeowners everywhere — even those who aren’t looking to sell.

If your home’s value has increased since you bought it, there’s a good chance you have enough equity to refinance now.

Even homeowners who had no equity or were underwater in the past might be refi eligible thanks to the enormous spike in home values nationwide.  

If you’re still paying an above-market mortgage rate, find out whether you qualify to refinance. Today’s interest rates are low enough that millions of homeowners could lower their rates and monthly payments.

Verify your refinance eligibility. Start here (Sep 21st, 2021)

Editor’s note: Two HARP replacement programs — Fannie Mae’s HIRO and Freddie Mac’s FMERR — were put on hold in August 2021 due to a low number of applicants. With home equity increasing nationwide, many owners are eligible to refinance without needing a special program like HIRO or FMERR. Contact a lender to check your equity levels and find out whether you qualify for a refinance.

Relief refinance program benefits

These programs are intended to help homeowners who are currently paying above-market mortgage rates, but can’t refinance because they have too little home equity.

The biggest benefit is that qualifying borrowers can refinance into a lower interest rate and monthly payment, helping them afford housing costs and avoid foreclosure.

But there are other advantages to using HIRO or FMERR, too. For example: 

  • No maximum LTV ratio — If the home loan being refinanced is a fixed-rate mortgage, there’s no maximum LTV for the new loan. That means if your mortgage is $150,000 and your home is only worth $130,000, you could refinance even though your loan-to-value is 115%
  • Private mortgage insurance (PMI) not required — If you have PMI on your existing loan, it must be transferred to the new loan. But if you don’t currently have PMI, you won’t pay it on the new mortgage
  • Streamlined application process — 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
  • You don’t have to use your current lender — 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 remove many of the eligibility requirements for a conventional refi. They’re often a faster and more affordable way for borrowers to get a lower rate and housing payment.

FMERR eligibility (Freddie Mac’s HARP replacement)

To qualify for FMERR — the Freddie Mac Enhanced Relief Refinance program — your current mortgage must be owned by Freddie Mac. (You can check your status using Freddie’s loan lookup tool.)

This loan is for homeowners with high loan-to-value ratios. That means you must be above Freddie’s minimum LTV threshold, which is 97.01% for a one-unit primary residence. You can see a full list of FMERR LTV requirements by property type here.

In addition, FMERR rules state:

  • Your current loan must have been originated on or after November 1, 2018
  • At least 15 months must have passed since your current loan was originated
  • You must have NO late payments in the last 6 months, and no more than one in the last year

The FMERR program is open to homeowners with second homes and investment properties as well as owner-occupied homes. And, you can use it to refinance a home with one, two, three, or four units.

There’s no maximum LTV for fixed-rate mortgages. But if your current loan is an ARM, the maximum LTV for FMERR is 105%.

Check your refinance eligibility (Sep 21st, 2021)

HIRO eligibility (Fannie Mae’s HARP replacement)

To be eligible for the Fannie Mae High LTV Refinance Option (HIRO), your mortgage needs to be owned by Fannie Mae. (Use Fannie Mae’s loan lookup tool to see if the agency owns your loan.)

Aside from that, Fannie’s requirements for HIRO are very similar to Freddie’s requirements for FMERR.

  • Your current loan must have been originated on or after October 1, 2017
  • At least 15 months must have passed since your current loan was originated
  • You must have NO late payments in the last 6 months, and no more than one in the last year

Fannie Mae also requires a minimum LTV ratio of 97.01% for a single-family, owner-occupied residence.

But the High-LTV Refinance Option is a little more lenient than FMERR when it comes to 2-4-unit properties. You can have a minimum LTV as low as 75.01% to qualify.

Check your refinance eligibility (Sep 21st, 2021)

You need a ‘net tangible benefit’ to be refi-eligible

Both HARP replacement programs require a ‘net tangible benefit’ to qualify. That means you’re only eligible if the refinance will improve your financial situation in a clear way.

The new mortgage must offer at least one of these benefits:

  • Lower mortgage interest rate
  • Lower monthly principal and interest payment
  • Shorter loan term
  • Replacing an adjustable-rate mortgage with a fixed-rate mortgage

If today’s mortgage rates are significantly lower than your current rate, there’s a good chance you’ll meet the net tangible benefit requirement.

High-LTV refinance appraisals

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 a home appraisal with your refinance. Appraisals typically cost $400 or more.

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.”

That means if you get an appraisal during your refinance, 1) you’ll have to pay for it, and 2) the lender is required to use the appraised value as part of your application. So don’t let anyone order an appraisal unless you are sure that you did not receive a waiver.

*DU refers to Desktop Underwriter, Fannie Mae’s automated underwriting software.

What about mortgage insurance?

Both Freddie Mac and Fannie Mae’s HARP replacement programs state that if you already have private mortgage insurance, it must be transferred to the new loan at the same coverage rate. But if you do not currently pay PMI, you won’t need it on your new mortgage.

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.

Check your refinance eligibility. Start here (Sep 21st, 2021)

HARP replacement program FAQ

Who qualifies for a HARP replacement program?

HARP replacement programs are available for homeowners with conventional mortgages who don’t have enough home equity to refinance. To qualify, you typically need a loan-to-value ratio above 97% (meaning you have less than 3% equity in the home). You’ll also need an on-time payment history over the past year, and it must have been at least 15 months since you bought your home or refinanced it.

What is the current HARP replacement program?

FMERR is the HARP replacement for borrowers with Freddie Mac loans. This stands for ‘Freddie Mac Enhanced Relief Refinance.’ HIRO, which stands for ‘High LTV Refinance Option,’ is the HARP replacement program for borrowers with Fannie Mae loans. Homeowners with FHA, VA, and USDA loans should look into Streamline refinancing options, including the VA IRRRL for VA mortgages.

Is the HARP replacement program legitimate?

Yes, HARP replacement programs FMERR and HIRO are run by legitimate mortgage agencies regulated by the Federal Housing Finance Agency. These programs are available from mortgage lenders nationwide.

When did the HARP program end?

HARP, the Home Affordable Refinance Program, ended on December 31, 2018.

Can I refinance my HARP loan?

If you used the HARP refinance program in the past, you are not eligible to use the HIRO or FMERR program, according to Fannie and Freddie’s guidelines.

Did Congress pass a homeowner relief program?

Congress has passed various relief programs for homeowners during the COVID pandemic. But these measures only provide temporary payment relief. HARP replacement programs FMERR and HIRO provide permanent payment relief for underwater homeowners.

What’s the minimum credit score for HARP replacement programs?

Neither Fannie Mae nor Freddie Mac’s program has an official minimum credit score. However, mortgage lenders are allowed to impose their own credit minimums. So if credit score is a concern for you, ask lenders about their requirements for FMERR or HIRO before you apply.

What is the mortgage stimulus for the middle class?

There’s no specific mortgage relief program ‘for the middle class.’ However, Fannie Mae and Freddie Mac’s HARP replacement programs could offer relief to middle-class homeowners who have not benefitted from rising home values and need to lower their mortgage payments.

Check your refinance eligibility

Today’s refinance programs can offer relief for homeowners struggling with affordability. Mortgage rates are still at historic lows, and refinancing can help borrowers lock in a lower rate and monthly payment for the long run.

Check your eligibility for a mortgage refinance today.

Verify your new rate (Sep 21st, 2021)