On August
25, 2016, the Federal Housing Finance Agency (FHFA) announced a new
refinance program by Fannie Mae and Freddie Mac that will be implemented in
October 2017 for borrowers who are underwater on their mortgages.
This new program will replace the current Home Affordable Refinance Program (HARP), which was set to expire on December 31, 2016. To
avoid a gap of almost one year between the commencement of the new program and
the expiration of HARP, the FHFA, which oversees both Fannie Mae and Freddie
Mac, has also extended HARP through September 30, 2017.
HARP was launched in 2009 to assist homeowners who have high
loan-to-value ratios to obtain refinanced loans with better rates. For clarity,
HARP is different than the Home Affordable Modification Program (HAMP), which
is more generally familiar to our readership. HAMP was designed to assist
homeowners in obtaining mortgage modifications on their existing loans whereas
HARP is for homeowners seeking to refinance their loans into an entirely new
mortgage product. Moreover, HAMP is for loans that are already in default or at
risk of default whereas HARP is only for homeowners who are current on their
loans.
A borrower is eligible for HARP through September 30, 2017 if:
- There are no missed mortgage payments within the last six months;
- There is not more than one missed mortgage payment within the last twelve months;
- The house is a primary residence, 1-unit second home, or a 1- to 4- unit investment property;
- It is a Fannie Mae or Freddie Mac-owned loan;
- The loan was made on or before May 31, 2009; and
- The loan-to-value is greater than 80%.
The new refinance program launching in October 2017 will be
more “targeted” than HARP, but details are not yet fully available. The
following are the currently known eligibility requirements:
- There are no missed mortgage payments within the last six months;
- There is not more than one missed mortgage payment within the last twelve months;
- The borrower must have a source of income;
- It is a Fannie Mae or Freddie Mac-owned loan; and
- The borrower must receive a benefit, such as reduced monthly mortgage payments.
Of greatest import, unlike the expiring HARP, the new
program will extend eligibility to loans made after May 2009 and borrowers will
be able to refinance under the new program more than one time. Though more than
3.4 million homeowners have already refinanced under HARP, there are still
hundreds of thousands of eligible homeowners who are still in need of
assistance. This new program will continue to assist homeowners who are suffering
from the housing crisis and open up opportunities to refinance for new
categories of homeowners.
Unfortunately, no new announcements have been made to extend
HAMP through 2017 even though there remains many properties currently in
foreclosure and many millions more properties at risk for default. HAMP is set
to expire on December 31, 2016.
