Lending Servicing

HARP extended into 2017; FHFA plans new refinance program

More than 300,000 homeowners still eligible for HARP

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The Federal Housing Finance Agency announced it extended the Home Affordable Refinance Program until Sept. 30, 2017 in order to create a smoother transition period for a new refi product it is planning to launch toward the end of 2017.

According to the FHFA, Fannie Mae and Freddie Mac will implement a new refinance offering aimed at borrowers with high loan-to-value ratios.

“The new refinance offering will provide much-needed liquidity for borrowers who are current on their mortgage but are unable to refinance through traditional programs because their LTV ratio exceeds the Enterprises’ maximum limits,” the release stated.

Since the new high LTV streamlined refinance offering will not be available to borrowers until October 2017, the FHFA said it “created a bridge” to ensure that high LTV borrowers who are eligible for HARP will not be without a refinance option.

Currently, the FHFA estimates there are more than 300,000 U.S. homeowners that could still refinance through HARP.

Both the Home Affordable Modification Program and HARP were originally launched in 2009 to provide relief to borrowers by lowering their monthly payments and were set to expire on Dec. 31, 2013.

However, in June 2014, U.S. Treasury Secretary Jacob Lew announced several initiatives designed to spur the flailing housing market, including the extension of HAMP until Dec. 31, 2016.

Then, in May 2015, the FHFA announced that the deadline for HARP was extended to the end of 2016, matching the deadline of the HAMP.

In light of the programs ending, the Treasury, HUD, and the FHFA published a comprehensive report at the end of July 2016 that the government plans to continue working with the mortgage industry on various loss-mitigation programs moving forward, but caution the industry needs to be prepared to do more.

“Providing a sustainable refinance opportunity for high LTV borrowers who have demonstrated responsibility by remaining current on their mortgage makes financial sense both for borrowers and for the Enterprises,” said FHFA Director Melvin L. Watt. “This new offering will give borrowers the opportunity to refinance when rates are low, making their mortgages more affordable and thus reducing credit risk exposure for Fannie Mae and Freddie Mac.”

In order to be eligible for the new High LTV program, the FHFA stated that borrowers must fit the following requirements:

  • Must not have missed any mortgage payments in the previous six months
  • Must not have missed more than one payment in the previous 12 months
  • Must have a source of income
  • Must receive a benefit from the refinance in one of the following ways
    • Reduced monthly principal and interest payment.
    • Lower interest rate.
    • Shorter amortization term.
    • More stable mortgage product, such as moving from an adjustable-rate mortgage to a fixed-rate mortgage. 

The reported noted that full details will be available in coming months through the enterprises. 

“We are pleased to move forward with a new streamlined refinance option scheduled for October 2017. Aimed at borrowers with high loan-to-value ratios, the new option builds on the successes of the Home Affordable Refinance Program and will provide sustainable refinance opportunities to borrowers with existing Fannie Mae mortgages who are making their mortgage payments on time,” said Andrew Bon Salle, Fannie Mae executive vice president of Single-Family Business.

"Our forthcoming high loan-to-value offering, which is scheduled to be available in October 2017, will allow eligible borrowers to refinance into more affordable and sustainable mortgages as interest rates continue to be at historic lows. We expect to carry through many of the most successful features of the Home Affordable Refinance Program, including its streamlined documentation requirements.” said David Lowman, executive vice president of Single-Family Business with Freddie Mac. 

Unlike HARP, the FHFA stated that the new high LTV streamlined refinance offering is more targeted. Eligible borrowers are not subject to a minimum credit score, there is no maximum debt-to-income ratio or maximum LTV, and an appraisal often will not be required.

But unlike HARP, there are no eligibility cut-off dates connected with the new offering, and borrowers will be able to use it more than once to refinance their mortgage.

The FHFA noted that borrowers with existing HARP loans are not eligible for the new offering unless they have refinanced out of HARP using one of the enterprises traditional refinance products.

Click the next page for the specific eligibility requirements for each enterprise. However, the two carry a lot of resemblances. 

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