The Federal Housing Finance Agency said Thursday the Home Affordable Refinancing Program will be extended an additional year, and also announced a new refinancing opportunity specifically for borrowers with high loan-to-value ratios.
FHFA, which regulates Fannie Mae and Freddie Mac, said the two government-sponsored enterprises will roll out the new refinancing program in October 2017. It will be more targeted than HARP, the agency said, and will focus on borrowers whose LTV ratios are higher than the GSEs’ allowable limits. Standard Fannie and Freddie refinancing programs don’t allow refinancing for LTVs above 97%.
“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,” said FHFA director Mel Watt in a press release.
But the agency added that extending HARP through Sept. 30, 2017 will provide a “bridge” for high LTV borrowers to seek a refinancing option before the new program is fully implemented.
The HARP program has allowed 3.4 million borrowers to refinance their loans, taking advantage of lower mortgage rates and reducing their monthly payments. HARP was first introduced in April 2009 by former acting FHFA Director Edward DeMarco.
Once the HARP program expires, the new high LTV program will continue to provide underwater homeowners who are current on their payments a refinancing option. To qualify for the new program, the FHFA said, borrowers cannot have missed a mortgage payment in the previous six months or more than one payment in the previous year. They must have a source of income and the refinancing must result in a benefit such as a reduced monthly payment. FHFA will provide more details about the new refinancing option in the coming months, according to the 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,” Watt said.
Only 38,300 borrowers refinanced through HARP in the first half of 2016. In 2015, HARP refis totaled 110,111, down from 212,489 in 2014.