Understanding Your Home Refinancing Options After HARP

For many homeowners, refinancing a mortgage seems straightforward on the surface. However, the reality becomes far more complex when you’re carrying significant debt, struggling with poor credit, or facing a situation where your property’s market value has dropped below what you owe on your mortgage. This is where the challenge intensifies, and traditional refinancing pathways often slam shut.

The good news? If your mortgage is backed by one of the two major government-sponsored enterprises—Fannie Mae or Freddie Mac—you may still have access to programs designed specifically to help you refinance under difficult circumstances. While the original federal Home Affordable Refinance program is no longer accepting applications, its successors offer similar pathways for borrowers in tough positions.

The Evolution of Mortgage Relief: From HARP to Today’s Solutions

To understand where homeowners stand today, it helps to know the backstory. The Federal Housing Finance Agency (FHFA) launched the Home Affordable Refinance Program through a federal initiative in 2009, during the Obama Administration. This program was born from necessity—the housing market had collapsed, leaving millions of homeowners with little to no equity in their properties. Many were still making their monthly payments, but they were trapped by underwater mortgages and couldn’t access conventional refinancing options.

Between 2009 and 2018, when the program ended, nearly 3.5 million households used this initiative to refinance into lower interest rates or restructure their loans into more manageable forms. The program’s impact was significant, but as the housing market stabilized, the federal government transitioned support to newer alternatives.

Today, the FHFA manages two replacement programs that continue this mission: Fannie Mae’s High LTV Refinance (HLTV) program and Freddie Mac’s Enhanced Relief Refinance (ERR) program.

Two Modern Pathways: Understanding HLTV and ERR

As of late 2022, approximately 1.2 million U.S. homeowners still held mortgages where they owed more than their homes were worth. For these borrowers, conventional refinancing remains essentially inaccessible. That’s where HLTV and ERR step in.

Both programs work similarly in their core mission: they allow borrowers with negative equity to refinance without requiring a substantial equity position. However, there’s one crucial difference between the old and new approaches. The original program required a loan-to-value (LTV) ratio of 80% or lower, meaning you could owe up to 80% of your home’s value. The new programs have raised this threshold significantly to 97.01%.

To understand what this means in practical terms, consider this calculation: your LTV is determined by dividing the amount you owe by your home’s estimated value. If your mortgage balance is $200,000 and your home appraises at $180,000, your LTV is 111% (meaning you’re underwater). Under the newer programs, you could potentially qualify for refinancing even in this situation, whereas the old rules would have excluded you.

To qualify for either HLTV or ERR, the new loan must deliver at least one of the following benefits:

• Lower monthly principal and interest payments
• A reduced interest rate
• A shorter loan repayment timeline
• Conversion to a more stable mortgage structure, such as switching from an adjustable-rate mortgage (ARM) to a fixed-rate loan

Determining Your Eligibility for Modern Refinancing Programs

Beyond the LTV requirements, borrowers must demonstrate a solid track record with their current mortgage. Here’s what FHFA and the lenders administering these programs require:

• Mortgage origination date: Your loan must have been issued after September 2017
• Loan age: Your mortgage must be at least 15 months old
• Payment status: All current mortgage payments must be up-to-date
• Recent payment history: No 30-day late payments in the past six months
• 12-month delinquency window: No more than one 30-day late payment in the past year, with no instances of payments that are 30+ days overdue

Additionally, there is no minimum credit score requirement for these programs, which can be particularly helpful for borrowers who experienced financial hardship during the housing crisis or recent economic downturns.

How to Navigate the Refinancing Process

If you believe you might qualify, here’s how to move forward:

1. Identify Your Loan Servicer and Backing Institution Contact your current mortgage servicer to ask whether your loan is backed by Fannie Mae or Freddie Mac. Alternatively, you can visit their official websites—both provide tools to search loans and confirm which institution backs yours. Knowing your loan’s origination date is essential, so have that information ready.

2. Choose Your Lending Partner You can refinance through your existing lender or shop for a new one. Many banks, credit unions, and mortgage companies are approved to originate HLTV and ERR loans, so you have flexibility here.

3. Compile Required Documentation Gather the necessary paperwork before approaching a lender. This typically includes recent mortgage statements, details about any second mortgage or home equity line of credit, a complete list of your monthly debt obligations, and income verification documents (recent pay stubs, tax returns, or employment verification).

4. Submit Your Application Work with your chosen lender to complete and submit the formal application. They’ll review your information, verify your eligibility, and guide you through their institution’s specific process.

5. Close and Transition If approved, you’ll sign your new loan documents and begin making payments according to your new mortgage terms. The refinancing process typically takes several weeks from application to funding.

Weighing the Advantages and Disadvantages

Before committing to a refinance, honestly assess whether the benefits outweigh the costs and efforts involved.

Advantages of HLTV and ERR

• Available to borrowers with little or no home equity (or even negative equity)
• Potential to lower your interest rate and reduce monthly payments
• Streamlined application process compared to conventional refinances
• No minimum credit score threshold, making these programs accessible to borrowers with credit challenges
• No requirement to pay mortgage insurance on the new loan
• No maximum debt-to-income ratio, unlike many conventional mortgage products

Disadvantages to Consider

• Refinancing comes with costs: Closing costs, appraisal fees, title insurance, and processing fees can easily accumulate to $3,000–$5,000 or more
• Current market conditions: Interest rates for refinances remain relatively elevated compared to historical averages, which may limit your savings
• Not available for homeowners in foreclosure: If your lender has begun foreclosure proceedings, these programs won’t help

Making Your Decision: Is Refinancing Right for You?

If you’re dissatisfied with your current mortgage terms, it’s worth investigating whether you qualify for HLTV or ERR, even if you didn’t initially qualify for the original HARP program. For many homeowners with negative or minimal equity, these programs represent the only realistic path to refinancing, since most conventional lenders require an LTV of 80% or less.

If these programs don’t work for your situation, explore other FHFA-supported options like the Low-Income Borrower Refinance program. Additionally, check whether your state administers a Homeowner Assistance Fund (HAF), which may offer direct financial support. You can also discuss a loan modification with your mortgage servicer—this approach can permanently or temporarily alter certain terms of your mortgage if you’re struggling with monthly payments.

The key is to take action before your situation deteriorates further. Refinancing or modifying your mortgage can offer meaningful relief, but these opportunities require timely exploration and careful consideration of costs versus benefits.