If you’re underwater on your mortgage but are managing to keep up with your payments, there are several new government programs that can help. As interest rates are at historic lows, now may be the perfect time to lower your monthly payments.
HARP Program Ends, But Underwater Homeowners Still Have Options
The Home Affordable Refinance Program (HARP) was a federal government loan modification program introduced in 2009, to help struggling homeowners. In the wake of the subprime mortgage crisis of 2008, millions of homeowners across America found themselves unable to sell or refinance their homes.
The HARP program, created in coordination with Fannie Mae and Freddie Mac helped put millions of Americans into more affordable home loans. As of 2014, borrowers who refinanced under the popular HARP program were saving an average of almost $350 per month, or over $4,000 per year.
But the popular HARP program, expired Dec. 31, 2018; the good news is, that the government just rolled out two similar, streamlined refinancing programs to fill the gap.
-Fannie Mae’s program is called the High Loan-to-Value Refinance Option -Freddie Mac’s program is called the Enhanced Relief Refinance.
Who Are the New HARP Replacement Programs Good For?
HARP required loans to have taken place on or before May 31, 2009. Fannie and Freddie’s new High-LTV programs will serve mortgages that were originated on or after October 1, 2017. Both Fannie and Freddie’s programs are viable options if you are a homeowner who is making on-time mortgage payments. But nevertheless are experiencing a drop in your home value, and are underwater on the mortgage. And or if you’re finding it almost impossible to refinance your upside down mortgage to today’s lower interest rates, even if you have great credit.
What Are the Main Benefits of the New High-LTV Refinancing Plans?
- Both programs offer key advantages for eligible homeowners, including:
- Reducing monthly payments
- Lowering interest rates
- A More Stable Mortgage
For example, you can benefit by switching from an adjustable rate mortgage, or ARM, to a fixed rate shortening term. Also, change from a 30-year to a 15-year loan and you can build equity faster, and lower closing costs.
According to the Federal Housing Finance Agency (FHFA), more than 3 million Americans saved an average of $2,400 per year since HARP launched in 2009. So it pays to see if you qualify.
Plus interest rates may go up as high as 5.6% by 2020. That’s, according Freddie Mac, whose latest government-sponsored research expects rates on 30-year fixed mortgages to average 5.1% this year and 5.6% by 2020.
How Do the New Streamlined Refinancing Loans Work?
With these new High Loan-to-Value Refinance options, homeowners with no equity or even negative equity in their homes can get the same rate as someone with a lot of equity.
Also as a bonus, these loans are much faster and easier to process than standard refinances. This is possible due to strong government backing. Lenders have discovered that the Fannie Mae and Freddie Mac programs are safe and stable mortgage products to offer to their customers.
With many traditional refinance programs, people who want to refinance their homes may be unable to qualify if they owe more on their home than the property is worth - which is known as being “underwater” on their property. The term underwater can also be called “negative equity.” A homeowner could make all of their payments on time, and still be in an underwater property if market values shift.
What Do You Need to Know About HARP-Replacement Programs?
Both the new Fannie Mae high LTV refinance option, and the Freddie Mac Enhanced Relief Refinance new programs are based more on your loan-to-value, or LTV ratio:
Your LTV must exceed 95 percent of your home. (This is higher than the 80 percent floor for the old HARP program.) The new programs are for mortgages that were originated on or after Oct. 1, 2017. Both loans are designed for homeowners in financially stressed markets, where people haven’t experienced the property appreciation of other US markets (like San Francisco, Seattle, or New York city).
Other Ways Government Programs Can Help Lower Your Mortgage:
Another option instead of refinancing, and essentially starting a new loan – is to do a modification of the loan that you currently have.
The Fannie Mae and Freddie Mac Flex Modification Program Specifically, you might be able to get a lower monthly mortgage payment through the government’s Flex Modification program.
In a loan modification, the bank agrees to alter your mortgage terms, which in turn lowers your monthly payment to a more affordable amount. If Fannie Mae or Freddie Mac own your loan, you might qualify for a Flex Modification, which is a special loan modification program. Under this program, steps can be taken which may include lowering the interest rate and/or extending the term of the loan, to lower your monthly payments.
A Flex Modification, replaces the Home Affordable Modification Program (HAMP) program, and can reduce your mortgage payment by about 20%.
LendingTree is one of the most trusted sources in learning all your mortgage refinance options. LendingTree has helped millions of American’s re-finance their current mortgage.
It’s important to sit down and run the numbers with an experienced lender. Working with an experienced mortgage lender service like LendingTree can be crucial. Verifying your eligibility for these new government refinance programs is an extremely important financial decision for you and your family. For an important decision like that you should place your trust in an industry leader like LendingTree. An experienced HAARP replacement program approved lender can efficiently see if you meet the requirements.