HARP Replacement Programs (2024)

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Refinancing your mortgage can be difficult if you have poor credit or a high debt-to-income (DTI) ratio. It can be practically impossible if you’re underwater—meaning your property is worth less than you owe on your mortgage.

Fortunately, underwater borrowers with mortgages backed by Freddie Mac or Fannie Mae may be able to get special relief. While the federal program known as the Home Affordable Refinance Program (HARP) is no longer available, eligible homeowners can still use the programs that replaced HARP.

What Was HARP?

HARP was created by the Federal Housing Finance Agency (FHFA) in 2009, through the Obama Administration’s Making Home Affordable program. Its purpose was to help homeowners refinance their mortgages, particularly those who were left with little to no equity after the housing market crash, but who were still keeping up with their mortgage payments.

Between 2009 and 2018, when the program sunsetted, nearly 3.5 million households used HARP refinancing to get into lower interest rates or make their mortgages otherwise more affordable.

Options for Refinancing a Freddie or Fannie Loan

As of Q4 2022, there were 1.2 million U.S. mortgages underwater. While HARP is no longer around to help homeowners refinance, the FHFA has two replacement programs that offer similar relief:

  • Fannie Mae’s High LTV Refinance (HLTV)
  • Freddie Mac’s Enhanced Relief Refinance (ERR)

Both HLTV and ERR can help borrowers who are underwater, but the new programs are different from their predecessor in one significant way. The minimum loan-to-value (LTV) ratio for a single-family home is now 97.01%—up from HARP’s 80%.

To calculate the LTV on your mortgage, divide the amount you owe by the estimated value of your home. For example, if you owe $200,000 and your home is worth $180,000, your LTV is 1.11 (200,000/180,000), or 111%.

If you apply for HTV and ERR, you can only be approved if the program does at least one of the following for your loan:

  • Reduces the monthly principal and interest payment
  • Reduces the interest rate
  • Shortens the repayment time frame
  • Changes the loan to a more stable product, such as switching from an adjustable-rate mortgage (ARM) to a fixed-rate loan

Am I Eligible for a HARP Replacement Program?

In addition to meeting LTV requirements, applicants will need to have a mostly positive payment history on their mortgage in order to qualify. Here are some additional eligibility requirements:

  • The mortgage originated after September 2017
  • The mortgage is at least 15 months old
  • Mortgage payments are up-to-date
  • No 30-day delinquencies in the past six months
  • No more than one 30-day delinquency in the past 12 months (and no delinquency beyond 30 days in that timeframe)

How Can I Apply?

  1. Look up your loan. You can ask your lender if your mortgage is backed by Freddie or Fannie, or visit the Fannie or Freddie websites to see who your loan is backed by and find your origination date.
  2. Find a lender. You can apply through your current lender or find a new one.
  3. Gather your documents. Application documents may include mortgage statements, information on your second mortgage (if applicable), monthly debt payment details and income documentation.
  4. Apply. Fill out and submit an application. Your lender can review it and help you complete the process.
  5. Finish the process. If you’re approved, you’ll need to sign the new loan documents and begin making payments on the new mortgage.

Pros and Cons of HARP Replacement Programs

Refinancing your mortgage can reduce your monthly expenses, but it can also be a costly and time-consuming process. Before you apply for HLTV or ERR, consider these pros and cons.

Pros

  • Available for homeowners with no or negative equity
  • Potential reduction in your interest rate and monthly payments
  • Simpler application process than a regular refinance
  • No minimum credit score requirement
  • You won’t have to take on new mortgage insurance
  • No maximum DTI ratio

Cons

  • Closing costs and other fees can add up to $5,000
  • Current refinance interest rates are relatively high
  • Not available for homeowners at risk of foreclosure

Bottom Line

If you’re unsatisfied with your mortgage terms, it’s worth checking into your eligibility for HTV or ERR, even if you didn’t qualify for HARP. For some homeowners who are underwater, this could be the only way to refinance, since most lenders require an LTV of 80% or lower in order to approve a traditional refinance.

If you need help with your mortgage but you’re not eligible for HTV or ERR, consider other FHFA homeowner programs like the Low-Income Borrower Refinance option, or check out your state’s Homeowner Assistance Fund (HAF). You could also ask your mortgage servicer for a loan modification, which (temporarily or permanently) changes some terms of your home loan if you’re struggling to make monthly payments.

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HARP Replacement Programs (2024)
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