Turns out the Home Affordable Refinance Program (HARP) isn’t sunsetting just yet.
The program has been extended for a third time – this time to September 2017 – the Federal Housing Finance Agency (FHFA) has announced.
However, this time around, the program is being extended in order to create a “bridge” to a new high loan-to-value (LTV) streamlined refinance offering that will essentially replace HARP.
This new offering, the agency says, will provide much-needed liquidity for borrowers who are current on their mortgages but are unable to refinance through traditional programs because their LTV ratios exceed the enterprises’ maximum limits. It will build on the lessons learned from HARP and its streamlined approach to refinancing.
In order to qualify for the new offering, borrowers 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; and must receive a benefit from the refinance, such as a reduction in their monthly mortgage payments, the FHFA says in a release.
As with HARP, 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.
However, unlike HARP, there are no eligibility cutoff dates connected with the new offering, and borrowers will be able to use it more than once to refinance their mortgages.
Borrowers with existing HARP loans are not eligible for the new offering unless they have refinanced out of HARP using one of Fannie Mae or Freddie Mac’s traditional refinance products.
“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,” says Melvin L. Watt, director of the FHFA, in a press release. “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.”
HARP and the Home Affordable Modification Program were originally launched in 2009 and were set to expire on Dec. 31, 2013; however, in 2013, they were extended through 2015. The two programs were later extended again, albeit separately, through 2016.
The decision to extend the program comes as participation is waning. The FHFA reports that 18,310 borrowers refinanced their mortgages through the program from Jan. 1 through June 30 of this year – the lowest participation rate since the second quarter of 2009, when the program was first launched.
The FHFA’s second-quarter Refinance Report shows that although total refinance volume increased in June, as mortgage interest rates edged lower, HARP refinances represented only 4% of total refinances.
The program has helped more than 3.4 million struggling homeowners retain their homes in the aftermath of the Great Recession, the FHFA says.
More than 323,000 U.S. borrowers are still eligible for the program and have a financial incentive to refinance as of the first quarter of this year, the FHFA reports.