There have been many mortgage relief incentives throughout the years. Probably the best-known one is HARP, which helped countless borrowers keep their homes after the financial crisis.
Today, homeowners can get temporary payment relief under Congress’s COVID stimulus programs.
But what if you need permanent mortgage relief — a lower payment for the long run?
Luckily, you have options. Fannie Mae’s HIRO program and Freddie Mac’s Enhanced Relief Refinance have actively helped homeowners refinance with little or no equity in their homes.
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Mortgage relief refinance programs for 2021
A mortgage refinance relief
program replaces your existing loan with a new loan that has a lower interest
rate and more affordable payments.
people think of government or Congress mortgage relief, they’re thinking of
HARP — the Home Affordable Refinance Program.
HARP was a government program
rolled out by the Federal Housing Finance Agency in 2009. For nine years, it
helped millions of homeowners refinance after being hard-hit by the housing
The HARP program ended in
But many homeowners were
still underwater on their mortgages — especially in areas where home values
instead of rising in
So Fannie Mae and Freddie Mac
created similar relief programs to help homeowners who missed the HARP window.
Fannie Mae’s HIRO program and Freddie Mac’s FMERR help homeowners refinance at current low rates with little or no home equity. Do you qualify? Here’s what you need to know.
HIRO: The High-LTV Refinance Option
Fannie Mae’s High-LTV
Refinance Option (HIRO) allows homeowners to refinance with no equity or an underwater
loan. And there’s no maximum LTV ratio.
However, only homeowners whose mortgages are currently owned by Fannie Mae can qualify. (You can find out whether your mortgage is a Fannie Mae loan here.)
Other conditions to use the
high LTV refinance option include:
- Your loan-to-value ratio is at or above 97.01 percent for a single-family home (see a full list of HIRO LTV requirements here)
- Your loan was originated on or after October 1, 2017
- You have a history of on-time mortgage payments
- You have no more than one late payment in the last year, and none in the last 6 months
And, importantly, you need a “net tangible benefit” to qualify for HIRO.
That means there must be a clear reason for your refinance — whether it’s a lower monthly payment, a shorter loan term, or a switch from an adjustable-rate mortgage to a safer fixed-rate mortgage.
You can find out whether you meet the guidelines for a HIRO refinance by checking with a lender.
Editor’s Note: As of August 31, Fannie Mae discontinued purchasing or securitizing loans under the HIRO program. They indicated that very few applicants were taking advantage of this program. It is likely the program’s lack of use is due to rising property values and the resulting increases in equity in homes. Core Logic’s Home Price Index estimates that property values are up 18% in July 2021 relative to July 2020. You may find that you have more equity in your home than you originally thought due to recent increases in property values.
FMERR: The Freddie Mac Enhanced Relief Refinance
FMERR — which stands for the Freddie
Mac Enhanced Relief Refinance — is Freddie’s
version of a high-LTV program.
Originally set to expire in
September of 2019, FMERR has been extended and is available to homeowners whose
current mortgages are backed by Freddie Mac. (You can check Freddie’s loan lookup tool to see whether the agency owns your loan.)
Other requirements to qualify for an
Enhanced Relief Refinance include:
- Your loan-to-value ratio is at 97.01 percent or higher for a single-family, primary residence
- Your loan was originated on or after November 1, 2018
- You’ve had the loan for at least 15 months
- You have no late mortgage payments in the last 6 months, and no more than 1 in the last year
The FMERR program can be used for
existing fixed-rate mortgages and adjustable-rate mortgages.
And, FMERR is not limited to single-family homes or ‘primary residences.’ Homeowners with 2-,3-, and 4-unit homes, as well as second homes and investment properties, can qualify as long as they meet other eligibility requirements.
A mortgage lender can tell you whether you qualify for this refinance option. You do not have to refinance with your current lender.
Editor’s Note: As Fannie Mae did with their HIRO loan program, Freddie Mac has also paused its FMERR program effective August 31, 2021. Freddie Mac also cited “extremely low volume” as a reason for pausing the program. We recommend that you double-check the value of your property to see if you have more equity that you originally concluded. If you find that you do in fact have limited equity in your home, review the content below and see if you might be eligible for any of the programs.
Mortgage relief options for government-backed loans
Popular mortgage relief programs since 2009 (including HARP, HAMP, FMERR, and HIRO) have only been available to homeowners with conventional mortgages backed by Fannie Mae or Freddie Mac.
But what if your loan is government-backed?
Homeowners with federally-backed FHA, VA, and USDA mortgages have access to different mortgage relief programs than those with conventional loans.
Namely, they can use a Streamline Refinance.
The Streamline Refinance is a special
mortgage refi program for people with government-backed
It’s similar to a mortgage
relief refinance, because you can use a Streamline Refi even
if your home is underwater or has very little equity.
And a Streamline Refinance has other benefits, too.
- There’s less paperwork because you don’t have to re-verify your income or employment or get the home appraised
- Government-backed loans typically have below-market rates, so you might be able to get a much lower rate and monthly payment using a Streamline Refinance
Homeowners can qualify for an FHA Streamline if they’ve made
at least three consecutive on-time payments on their existing FHA loan.
Even if you make your three consecutive payments while in forbearance, you may qualify for FHA Streamline refinancing. The Department of Housing and Urban Development (HUD), which oversees the Federal Housing Administration, is one of the more lenient housing agencies.
For a VA Streamline Refinance (also called the ‘IRRRL’), the
rules are even more lenient.
You can use this refinance even if your current loan is
delinquent. However, the lender must verify that the reason for delinquency has
been resolved and you’ll be able to make payments on the new loan.
Congress mortgage stimulus (COVID-19 mortgage relief)
Homeowners who have experienced
financial hardship during the pandemic are likely looking for a different kind
To help borrowers struggling with
mortgage payments due to unemployment or illness, Congress enacted certain
mortgage stimulus programs as part of the CARES Act.
Many of these assistance programs
have been extended into 2021 to help those who are still struggling
Most importantly, government agencies are offering mortgage relief in the form of forbearance. A forbearance plan temporarily suspends a borrower’s monthly mortgage payments until they get back on their feet financially.
Congress also protected homeowners from late fees and negative credit reports during this time — even if they were unable to make home loan payments.
- Mortgage forbearance: Forbearance pauses your mortgage payments during times of financial hardship. Interest continues to accrue, and you must make up the missed payments later. Mortgage forbearance works like student loan forbearance programs, providing temporary relief from the loan’s repayment until the borrower can resume payments
- If you have a conforming loan (backed by Fannie Mae or Freddie Mac) there is currently no deadline for requesting an initial loan forbearance
- If you have an FHA, VA, or USDA loan, the deadline for requesting an initial mortgage forbearance is September 30, 2021
Homeowners who entered a
forbearance agreement during the pandemic may have some options for longer-term
mortgage relief once forbearance ends.
For instance, your servicer might agree to a loan modification program, which changes the rate or terms of your loan to make it more affordable.
However, these types of solutions are not regulated by Congress. The options available depend on who owns your mortgage loan.
If your forbearance plan is about to end — or you want to end it early and resume making payments — contact your loan servicer about options after forbearance and the best way forward for your situation.
Veteran mortgage relief options
One benefit of a VA loan is that the Department of Veterans Affairs can help you out if you’re having trouble making mortgage payments.
Veteran mortgage relief can come in the form of a Streamline Refinance loan (IRRRL) or getting help from a VA loan professional to figure out your payment plan.
If you’re underwater on a VA loan and need a relief refinance, you may be able to use the VA Streamline Refinance (IRRRL) to do so.
Like other streamline programs, the IRRRL requires no income or employment check, and skips the home appraisal — so your LTV won’t matter.
Or if you’re not sure whether a refinance is right for you, you might take advantage of the other VA relief program.
For VA loan holders as well as veterans with non-VA mortgages, the VA offers access to professional counselors who can help you if you’re having trouble making your payment.
These people help veterans figure out whether they should refinance, try to restructure their loan, or take another measure to prevent foreclosure.
Even better, the VA’s “loan technicians” work with your lender on your behalf — so you don’t have to figure out all the logistics of a mortgage relief program yourself.
How mortgage relief refinance programs work
The idea behind a mortgage relief refinance program like FMERR or HIRO is to help homeowners lower their mortgage rates. In turn, their monthly payments become more affordable.
Relief refinance incentives have helped millions of homeowners avoid mortgage delinquencies and even foreclosure this way.
But why are relief refinance programs necessary in the first place?
To understand a mortgage relief refinance, you have to understand these two things first:
- The lower your mortgage rate is, the lower your monthly payment is. The goal of a relief refinance is to drop a homeowner’s interest rate enough that they can once again afford their mortgage payments
- Your ability to refinance depends on your home value. When home values fall, homeowners may be unable to refinance into a lower rate and payment
Typically, homeowners can’t refinance unless their mortgage is below a certain loan-to-value ratio. But a relief refinance solves this problem.
Refinancing with a high loan-to-value
Loan-to-value is the amount you owe on your home loan compared to the home’s current value.
For example, if your home is worth $100,000, and you owe $97,000 on your mortgage, you have a 97 percent loan-to-value ratio.
Incidentally, 97 percent is typically the maximum LTV to qualify for a conventional refinance.
When a home’s value drops faster than the owner is paying off their mortgage, their LTV can suddenly spike above that 97 percent benchmark. This makes them ineligible for a refinance under normal rules.
Using the example above: Say home values in the area start dropping, and that $100,000 home is suddenly worth $90,000.
The homeowner still owes $97,000 on their mortgage. So their new loan-to-value ratio is 108 percent (97/90=1.08). They are no longer allowed to refinance, and might be stuck with a mortgage payment they can’t afford.
Mortgage relief programs flip the rules around. Instead of staying under a maximum LTV ratio, your loan must be at or above a minimum LTV ratio.
Mortgage relief programs flip the rules around. Instead of staying under a maximum LTV ratio, your loan must be at or above a minimum LTV ratio.
In 2009, HARP began letting people
refinance with LTVs of 81 percent or higher. Many lenders
capped the allowable LTV at 105 percent.
Later on, most lenders raised the maximum LTV bar to 200 percent or removed it altogether. So homeowners could refinance no matter how deeply underwater they were on their mortgages.
The current relief refinance (HIRO) works the same way.
There’s no LTV ceiling for refinancing with the aptly named “high LTV refinance option.” But your LTV cannot be below 97.01 percent if you’re refinancing a single-family home.
Freddie Mac’s Enhanced Relief
Refinance has no maximum LTV either, as long as you’re refinancing a fixed-rate
mortgage. If you choose an adjustable-rate mortgage, LTVs are capped at 105
Why do the federal government and Congress offer mortgage stimulus?
Mortgage assistance programs exist to help homeowners afford their mortgage payments and avoid foreclosure.
Getting mortgage help from the government or a government-related agency might seem too good to be true. But it’s actually in these agencies’ best interest to support homeownership.
That’s because when a homeowner faces foreclosure, nobody wins. Mortgage lenders lose money. Investors lose money. And the homeowner loses their place to live and their spending power — they can no longer participate in the economy in the same way.
In very broad strokes, that’s what happened in the U.S. financial crisis of the late 2000s.
A dropoff in home values, coupled with a sharp economic downturn, left homeowners with unaffordable mortgage payments and too little equity to refinance into a lower rate.
HARP, the Home Affordable Refinance Program, was created in the wake of this crisis to help homeowners regain control of their mortgage debt and monthly cash flow.
Subsequent programs, like FMERR and HIRO, have carried on helping underwater homeowners refinance.
Even though U.S. home values have been consistently rising in recent years, there are still some places where they’re at a stand-still or falling. So plenty of homeowners can benefit from a high-LTV or underwater refinance.
If you find yourself in that situation, a mortgage relief refinance could help save you thousands.
On the other hand, if you’re in good shape with your existing
mortgage loan but need a temporary break from making payments because of the
pandemic, CARES Act mortgage relief measures can help.
Save more with a mortgage relief program in 2021
struggling with their mortgage payments, it’s a wise time to refinance.
Taking advantage of either HIRO,
FMERR, or a Streamline Refi program could have huge benefits.
Verify your new rate to see
just how much you could save with a mortgage relief refinance in 2021.
Mortgage relief programs FAQ
Yes. Fannie Mae’s High-LTV Refinance Option (HIRO) and Freddie Mac’s Enhanced Relief Refinance (FMERR) can help conventional loan borrowers refinance with little or no home equity. Homeowners with government-backed FHA, VA, or USDA loans can use the Streamline Refinance program, which does not require a new home appraisal (so falling home values won’t matter).
Fannie Mae’s HIRO program and Freddie Mac’s FMERR are the two main relief options for conventional loans. Technically, these agencies are not part of the government. They are overseen by the Federal Housing Finance Agency (FHFA), an independent regulator. But they have close ties to the government.
The CARES Act and subsequent American Rescue Plan have also provided mortgage relief during the COVID-19 pandemic. These programs do not refinance your mortgage but let you postpone repayment while keeping your loan active. The CARES Act also created a temporary moratorium on foreclosures and renter evictions.
There’s not really a Congress mortgage stimulus program. Congress did pass the federal stimulus package in 2009, which included HARP (the Home Affordable Refinance Program) and HAMP (the Home Affordable Modification Program). But both programs are now expired.
Congress has also helped homeowners get mortgage relief and protection from foreclosure during the coronavirus pandemic. But current relief refinance programs HIRO and FMERR are run by non-government agencies.
The Freddie Mac Enhanced Relief Refinance (FMERR) is a legitimate program run by Freddie Mac — one of the two agencies that backs the majority of U.S. mortgages. FMERR was originally meant to expire in September 2019, but was extended and is still currently available to homeowners.
To qualify for the Enhanced Relief Refinance program, your current mortgage must be owned by Freddie Mac. In addition, it must have been originated on or after November 1, 2018. And you must have a history of on-time mortgage payments. You can do a full eligibility check for the Enhanced Relief Refinance by talking to a mortgage lender.
No, the HARP program is no longer available. HARP, the Home Affordable Refinance Program, expired in 2018. You can no longer apply or be accepted for this mortgage relief program.
Yes, the VA can help veterans and service members who are struggling to make their mortgage payments. The association provides housing counselors who will help you figure out the right course of action and work with your mortgage servicer to set your payment plan back on track. The VA can help with mortgage payment issues even if your current mortgage is not backed by the Department of Veterans Affairs.