The Home Affordable Refinance Program® has been extended until September 30, 2017, according to a recent report released by the Federal Housing Finance Agency. The unprecedented move follows the agency’s introduction of a new refi product which will be commenced at the later part of 2017. The extension aims to create a smoother transition for the said change.
Who benefits from the program’s extension?
Both Freddie Mac and Fannie Mae will offer new refinance products that will benefit borrowers with high LTV ratios.
What is an LTV ratio?
An LTV ratio or Loan-to-Value ratio expresses the weight of the loan against the value of the asset that will be or has been purchased. For example, you borrowed $200,000 to purchase a property that is worth $250,000. The LTV ratio would be $200,000 divided by $250,000. That translates to 80 percent. The remaining whole of the hundred percent which is 20 percent is the lender’s cut. The higher the LTV ratio, the riskier the deal is for the lender.
This announcement means big for the 300,000 of Americans who remain eligible to refinance through HARP®.
The HAMP, also known as the Home Affordable Modification Program as well as the HARP® were both introduced back in 2009 to relieve hundreds of thousands of borrowers from the soaring mortgage rates that followed the recession. They were originally set to expire on December 31, 2013 but a June 2014 initiative moved HAMP’s expiry further to December 31, 2016. This was followed by the FHFA’s May 2015 announcement moving HARP® deadline towards the later end of 2016. Now, it has moved the deadline once more.
Who will benefit the new program?
The FHFA caters to individuals who will meet the following requirements:
- Has not missed a payment within the past 6 months
- Has not missed more than a single payment within the past 12 months
- Has a verifiable source of income
- When refinanced, the borrower must benefit in one of the following ways:
- shortened amortization
- lower interest rate
- reduced monthly payment
- settling into a more stable mortgage product such as opting for fixed rate mortgage from a hybrid one
What’s New?
Those who will be determined eligible for the loan will not be capped by credit score limitations. There is also no required debt-to-income ratio or loan-to-value ratio, and an appraisal will not always be required. There will not be any cut-off dates which will enable borrowers to use the program more than once in refinancing their mortgages.
It is emphasized, however, that current HARP® borrowers will not be able to take advantage of the new program unless they have used HARP® via one of the GSE’s traditional refi products.
Freddie Mac and Fannie Mae have both outlined their eligibility requirements in detail – with some conspicuous similarities.
Freddie Mac’s Eligibility Requirements:
- Only existing mortgages under Freddie Mac can be refinanced to a new Freddie Mac mortgage
- The Loan-to-Value ratio must be over the maximum LTV limit for a Freddie Mac No Cash-Out Refinance mortgage
- The borrower has paid at least 12 monthly payments of the mortgage held as subject for refinancing since it has been acquired from the GSE
- Borrower has been up to date with his/her payments within the past 6 months
- Borrower has not missed more than a single payment within the past 12 months
- The mortgage that is up for refinancing should not have been previously delivered as a Freddie Mac Relief Refinance Mortgage
- Borrowers may transfer their mortgage insurance into a new loan
- Borrowers can take advantage of this offer more than once as long as requirements are continually met
Fannie Mae Eligibility Requirements:
- Only existing mortgages under Fannie Mae can be refinanced to a new Fannie Mae mortgage
- The Loan-to-Value ratio must be over the maximum LTV limit for a Fannie Mae limited cash-out refinance
- The borrower has paid at least 12 monthly payments of the mortgage held as subject for refinancing since it has been acquired from the GSE
- Borrower has been up to date with his/her payments within the past 6 months
- Borrower has not missed more than a single payment within the past 12 months
- Borrowers can take advantage of this offer more than once as long as requirements are continually met
- Borrowers may transfer their mortgage insurance into a new loan
Have made it to the cut? See if you can take advantage of the extension or of the more inclusive new refi program.
