Mortgage relief refinance programs for 2021

Maggie Overholt
The Mortgage Reports editor

Is there a mortgage relief incentive for 2021? 

If you search for government or Congress mortgage relief, you’ll find results about programs like HARP and FMERR.

But the information you see might be misleading. HARP and FMERR, the two major relief programs, are now expired.

Even the CARES Act, which offered temporary relief from mortgage payments during COVID, won’t lower your loan costs in the long term.

There’s just one large-scale relief program for 2021 that helps homeowners the way HARP and FMERR did.

The Fannie Mae high LTV refinance option (HIRO) is still actively helping homeowners refinance with little or no equity in their homes.

Find out if you qualify for mortgage relief (Mar 4th, 2021)

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Former government mortgage relief programs

A mortgage refinance relief program replaces your existing loan with a new loan that has a lower interest rate and more affordable payments.

But the mortgage relief refinance programs you’re probably familiar with have already expired.

  • HARP (Home Affordable Refinance Program): 2009-2018
  • HAMP (Home Affordable Modification Program): 2009-2016
  • FMERR (Freddie Mac Enhanced Relief Refinance): 2017-2019

When most people think of government or Congress mortgage relief, they’re thinking of HARP — the Home Affordable Refinance Program. 

HARP was a government program rolled out by the Federal Housing Finance Agency in 2009. For nine years, it helped millions of homeowners refinance after being hard-hit by the housing crisis. 

The HARP program ended in 2018. 

But many homeowners were still underwater on their mortgages — especially in areas where home values have fallen instead of rising in recent years. 

So Fannie Mae and Freddie Mac created similar relief refinances to help homeowners who missed the HARP window.

Freddie Mac’s FMERR became incredibly popular, very fast. Homeowners took advantage of this program at the same time rates fell to historic lows in 2019. Many were able to save thousands on their mortgages thanks to the enhanced relief refinance. 

But FMERR also came to an end in September 2019. 

That leaves just one major, nationwide mortgage relief program for 2021: Fannie Mae’s high LTV refinance option, or “HIRO.” 

HIRO: the mortgage relief refinance program of 2021

Fannie Mae’s HIRO is a lot like HARP or FMERR. It allows homeowners to refinance with no equity or an underwater loan. And there’s no maximum LTV ratio.

The key difference? Only homeowners whose mortgages are currently owned by Fannie Mae can qualify. 

Other conditions to use the high LTV refinance option include: 

  • Your loan-to-value ratio is at or above 97.01 percent for a single-family home (see a full list of HIRO LTV requirements here
  • Your loan was originated on or after October 1, 2017
  • You have a history of on-time mortgage payments
  • You have no more than one late payment in the last year, and none in the last 6 months

And, importantly, you need a “net tangible benefit” to qualify for HIRO. 

That means there must be a clear reason for your refinance — whether it’s a lower monthly payment, a shorter loan term, or a switch from an adjustable-rate mortgage to a safer fixed-rate mortgage. 

You can find out whether you meet these guidelines for a HIRO refinance by checking with a lender. 

Find out if you qualify for HIRO. Start here (Mar 4th, 2021)

CARES Act mortgage relief offers temporary help

Along with stimulus checks for taxpayers, the 2020 CARES Act created temporary mortgage relief for borrowers experiencing financial hardship because of the coronavirus pandemic.

This came in the form of ‘forbearance,’ a relief plan that suspends borrower’s monthly mortgage payments until they get back on their feet financially.

Congress also protected homeowners from late fees, negative credit reports, and foreclosure during this time — even if they were unable to make home loan payments.

  • Mortgage forbearance: Forbearance pauses your mortgage payments during times of financial hardship. Interest continues to accrue, and you must make up the missed payments later. Mortgage forbearance works like student loan forbearance programs, providing temporary relief from the loan’s repayment until the borrower can resume payments
  • Moratorium on foreclosures: Loan servicers for conventional and government-backed loans — including FHA, USDA, VA, and loans backed by Freddie Mac and Fannie Mae — can’t begin foreclosure proceedings until at least March 31, 2021

But unlike a mortgage relief refinance program — like Fannie Mae’s HIRO or the Streamline Refinance which we’ll discuss below — coronavirus aid won’t offer a permanent solution or a lower interest rate for borrowers.

In fact, these relief options could cost you more in the long run. That’s because the missed amount has to be repaid with interest — which typically means extending your loan term or making bigger monthly payments after the forbearance plan ends.

Mortgage relief programs for government-backed loans 

Popular mortgage relief programs since 2009 (including HARP, HAMP, FMERR, and HIRO) have only been available to homeowners with conventional mortgages — loans backed by Fannie Mae or Freddie Mac. 

But what if your loan is government-backed? 

Homeowners with FHA, VA, and USDA mortgages have access to different mortgage relief programs than those with conventional loans.

Namely, they can use a Streamline Refinance.

The Streamline Refinance is a special mortgage refi program for people with government-backed loans.

It’s similar to a mortgage relief refinance, because you can use a Streamline Refi even if your home is underwater or has very little equity. 

And a Streamline Refinance has other benefits, too.

  • There’s less paperwork because you don’t have to re-verify your income or employment or get the home appraised
  • Government-backed loans typically have below-market rates, so you might be able to get a much lower rate and monthly payment using a Streamline Refinance

Homeowners can qualify for an FHA Streamline if they’ve made at least three consecutive on-time payments on their existing FHA loan.

Even if you make your three consecutive payments while in forbearance, you may qualify for FHA Streamline refinancing.

For a VA Streamline Refinance (also called the ‘IRRRL’), the rules are even more lenient.

You can use this refinance even if your current loan is delinquent. However, the lender must verify that the reason for delinquency has been resolved and you’ll be able to make payments on the new loan.

Find out if you qualify for a streamline refinance (Mar 4th, 2021)

Veteran mortgage relief

One benefit of a VA loan is that the VA can help you out if you’re having trouble making your mortgage payments.

Veteran mortgage relief can come in the form of a Streamline Refinance loan (IRRRL) or getting help from a VA loan professional to figure out your payment plan.

If you’re underwater on a VA loan and need a relief refinance, you may be able to use the VA streamline refinance (IRRRL) to do so. 

Like other streamline programs, the IRRRL requires no income or employment check, and skips the home appraisal — so your LTV won’t matter. 

Or if you’re not sure whether a refinance is right for you, you might take advantage of the other VA relief program. 

For VA loan holders as well as veterans with non-VA mortgages, the VA offers access to professional counselors who can help you if you’re having trouble making your payment.

These people help veterans figure out whether they should refinance, try to restructure their loan, or take another measure to prevent foreclosure. 

Even better, the VA’s “loan technicians” work with your lender on your behalf — so you don’t have to figure out all the logistics of a mortgage relief program yourself. 

How mortgage relief refinance programs work 

The idea behind a mortgage relief refinance program like HARP, FMERR, or HIRO is to help homeowners lower their mortgage rates. In turn, their monthly payments become more affordable.

Relief refinance incentives have helped millions of homeowners avoid mortgage delinquencies and even foreclosure this way. 

But why are relief refinance programs necessary in the first place? 

To understand a mortgage relief refinance, you have to understand these two things first: 

  1. The lower your mortgage rate is, the lower your monthly payment is. The goal of a relief refinance is to drop a homeowner’s interest rate enough that they can once again afford their mortgage payments
  2. Your ability to refinance depends on your home value. When home values fall, homeowners may be unable to refinance into a lower rate and payment. A relief refinance solves for this issue

Typically, homeowners can’t refinance unless their mortgage is below a certain loan-to-value ratio. 

Refinancing with a high loan-to-value

Loan-to-value is the amount you owe on your home loan compared to the home’s current value. 

For example, if your home is worth $100,000, and you owe $97,000 on your mortgage, you have a 97 percent loan-to-value ratio. 

Incidentally, 97 percent is the highest LTV you can normally have to qualify for a conventional refinance

When a home’s value drops faster than the owner is paying off their mortgage, their LTV can suddenly spike above that 97 percent benchmark. This makes them ineligible for a refinance under normal rules. 

Using the example above: Say home values in the area start dropping, and that $100,000 home is suddenly worth $90,000. 

The homeowner still owes $97,000 on their mortgage. So their new loan-to-value ratio is 108 percent (97/90=1.08). They are no longer allowed to refinance, and might be stuck with a mortgage payment they can’t afford. 

Mortgage relief programs flip the rules around. Instead of staying under a maximum LTV ratio, your loan must be at or above a minimum LTV ratio. 

Mortgage relief programs flip the rules around. Instead of staying under a maximum LTV ratio, your loan must be at or above a minimum LTV ratio. 

In 2009, HARP began letting people refinance with LTVs of 81 percent or higher. Many lenders capped the allowable LTV at 105 percent.

Later on, most lenders raised the maximum LTV bar to 200 percent or removed it altogether. So homeowners could refinance no matter how deeply underwater they were on their mortgages. 

The current relief refinance (HIRO) works the same way. 

There’s no LTV ceiling for refinancing with the aptly named “high LTV refinance option.” But your LTV cannot be below 97.01 percent if you’re refinancing a single-family home. 

Find out if you qualify for mortgage relief. Start here (Mar 4th, 2021)

Why the government and Congress sometimes offer mortgage relief

Mortgage relief programs exist to help homeowners afford their mortgage payments and avoid foreclosure.

Getting mortgage help from the government or a government-related agency might seem too good to be true. But it’s actually in these agencies’ best interest to create mortgage relief incentives.

That’s because when a homeowner faces foreclosure, nobody wins. Mortgage lenders lose money. Investors lose money. And the homeowner loses their place to live and their spending power — they can no longer participate in the economy in the same way.

In very broad strokes, that’s what happened in the U.S. financial crisis of the late 2000s. 

A dropoff in home values, coupled with a sharp economic downturn, left homeowners with unaffordable mortgage payments and too little equity to refinance into a lower rate. 

HARP, the Home Affordable Refinance Program, was created in the wake of this crisis to help homeowners regain control of their mortgage debt and monthly cash flow.

Subsequent programs, like FMERR and HIRO, have carried on helping underwater homeowners refinance.

Even though U.S. home values have been consistently rising in recent years, there are still some places where they’re at a stand-still or falling. So plenty of homeowners still stand to benefit from a high-LTV or underwater refinance. 

If you find yourself in that situation, a mortgage relief refinance could help save you thousands. 

On the other hand, if you’re in good shape with your existing mortgage loan but need a temporary break from making payments because of the pandemic, CARES Act mortgage relief measures can help.

Save more with a mortgage relief program in 2021

2020 saw mortgage rates steadily dropping off and eventually breaking new record lows.

For homeowners struggling with their mortgage payments, it’s a wise time to refinance. 

Taking advantage of either the HIRO program for conventional loans or streamline programs for government loans could have huge benefits. 

Verify your new rate to see just how much you could save with a mortgage relief refinance in 2021. 

Verify your new rate (Mar 4th, 2021)

Mortgage relief programs FAQ

Is there really a mortgage refinance relief program?

Yes. There’s one major mortgage relief program still operating in 2020. It’s Fannie Mae’s high LTV refinance option, also called HIRO.

The HIRO program is for homeowners who want to refinance but have little or no equity in their homes. HIRO is a replacement for other popular programs like HARP and FMERR, which have expired. It’s available to homeowners who currently have Fannie Mae loans.

What is Trump’s mortgage relief program?

President Trump does not have a mortgage relief program. The Trump White House does have a mortgage reform program, but it’s not intended to help individual homeowners with their loans. Instead, his plan has to do with releasing mortgage agencies Fannie Mae and Freddie Mac from government conservatorship.

This could have an impact on mortgage borrowing for individual consumers down the road. But Trump’s plan is not focused on mortgage relief like HARP was under the Obama administration.

Is there a government mortgage relief program?

There have been government mortgage relief programs in the past. The Home Affordable Refinance Program (HARP) is the best example. HARP was created by the government post-housing crisis, as part of the federal stimulus package, and ran for 9 years — during which time the government helped millions of homeowners refinance. 

Today’s mortgage relief program, HIRO, is not run by the government. But the agency that runs HIRO, Fannie Mae, is under “government conservatorship.” So it’s not entirely separate from the federal government either. 

The CARES Act of 2020 provided mortgage relief to alleviate the burden of monthly mortgage payments during the Covid-19 pandemic. These programs do not refinance your mortgage but let you postpone repayment while keeping your loan active. The CARES Act also created a temporary moratorium on evictions for renters.

What is the Congress mortgage stimulus program?

There’s not really a Congress mortgage stimulus program. Congress did pass the federal stimulus package in 2009, which included HARP (the Home Affordable Refinance Program) and HAMP (the Home Affordable Modification Program). But both programs are now expired.

There is no Congress mortgage stimulus program for 2020. The closest thing is Fannie Mae’s high LTV refinance option or a Streamline Refinance.

Is the Freddie Mac Enhanced Relief program legit? 

The Freddie Mac Enhanced Relief Refinance (FMERR) was a legit program under supervision from the FHFA, created to help underwater homeowners refinance. But it’s now expired — so don’t be confused by internet ads and articles that make it look like you can still apply. Freddie Mac’s enhanced relief program officially ended in September 2019, and there are no plans to revive it right now. 

Is the HARP program still available?

No, the HARP program is no longer available. HARP, the Home Affordable Refinance Program, expired in 2018. You can no longer apply or be accepted for this mortgage relief program.

Can the VA help with mortgage payments?

Yes, the VA can help veterans and servicemembers who are struggling to make their mortgage payments. The association provides financial counseling through “VA loan technicians,” who will help you figure out the right course of action and work with your mortgage servicer to set your payment plan back on track. The VA can help with mortgage payment issues even if your current mortgage is not backed by the Veterans Association. 

Verify your new rate (Mar 4th, 2021)