Refinance program: Program established for indebted homeowners to refinance their mortgage.
Refinance program: the replacement of an existing mortgage debt with another mortgage debt under different contract terms. The refinancing terms and conditions vary from state to state, and are based on factors such as inherent and projected risk, as well as credit rating and history.
The Benefits of a Refinance Program
Refinancing, the replacement of a mortgage debt with a new mortgage debt under different terms, is common practice by many banks. In the United States, the federal government also established a refinance program in 2009 to aid underwater homeowners to refinance their mortgage loans.
“The Home Affordable Refinance Program enables borrowers with little or no equity to refinance into more affordable mortgages without new or additional mortgage insurance. HARP targets borrowers with loan-to-value (LTV) ratios equal to or greater than 80 percent and who have limited delinquencies over the 12 months prior to refinancing.
“Significant changes have been made to HARP since the program was first introduced. For example, in 2011 the LTV ceiling was removed, property appraisal requirements were waived in certain circumstances, certain risk fees for borrowers selecting shorter amortization terms were eliminated, and certain representations and warranties were waived. In 2013, the eligibility date was changed from the date the loan was acquired by Fannie Mae or Freddie Mac to the date on the note, increasing the pool of eligible borrowers.
“Through HARP, you can get a lower interest rate (which means less out-of-pocket costs each month), get a shorter loan term, or change from an adjustable to fixed-rate mortgage. There’s no minimum credit score needed, either,” according to the Federal Housing Finance Agency.
Homeowners who remain current on their mortgage payments, have a mortgage owned by Fannie Mae or Freddie Mac, and owe as much or more than their home is worth, may be eligible for HARP refinancing. The program may allow them to lower their monthly payments, reduce their interest rate, secure a fixed-rate mortgage, build equity more quickly and lower closing costs.
The HARP program includes no underwater limits, meaning homeowners can refinance of the current value of their property. It also does not require an appraisal or underwriting, and may reduce risk-based fees as well as paperwork for income verification. HARP refinancing is available until December 31, 2018.
In order to qualify for HARP, homeowners must be current on their mortgage, with no late payments over thirty days in the last six months and no more than one in the past year. Their home must be their primary residence, a single-unit second home, or a one to four-unit investment property. Also, their loan must be owned by Freddie Mac or Fannie Mae, and must have been signed on or before May 31, 2009.
According to Maryland attorney Jason Ostendorf, “HARP provides some hope for homeowners, by lowering monthly payments, and reducing interest over the life of the loan. Assuming property values increase, homeowners who take advantage of HARP may successfully protect their investments.”
The Federal Housing Finance Agency has announced a new HARP-like program that will begin January 1, 2019. The new program will eliminate the requirement for the loan to have been opened on or before May 31, 2009. Instead, the loan note date must have been signed on or after October 1, 2017.
According to Fannie Mae, “At the direction of the Federal Housing Finance Agency (FHFA), Fannie Mae will offer a new high loan-to-value (LTV) refinance option designed for Fannie Mae borrowers who are making their mortgage payments on time, but whose LTV ratios exceed the maximum allowed for standard limited cash-out refinance transactions in the Selling Guide. This option will not be available for a number of months, but we are sharing the details with lenders now to allow time for any needed operational and system updates. The Selling Guide will be updated with these requirements next year, closer to the time when lenders can begin originating these high LTV refinances.
“The FHFA recently announced the extension of the Home Affordable Refinance Program (HARP). As a result, we are extending the expiration date of DU Refi Plus and Refi Plus. Lenders may continue to originate loans with application dates up to and including December 31, 2018. All whole loans must be purchased by us on or before September 30, 2019, or included in MBS pools with issue dates on or before September 1, 2019.”