house on chart showing decrease in statistics

There’s good and bad news for homeowners struggling with negative equity.

First, the bad news: At the end of December, the Home Affordable Refinance Program (HARP) expired. The program allowed qualified homeowners to refinance to more affordable interest rates, ultimately giving them lower monthly payments and providing a path to regain equity. When HARP ceased to be available in the mortgage marketplace, it had an effect on the overall availability of conventional home financing.

“The supply of credit dropped in December to its lowest since February 2017,” said MBA’s Associate Vice President of Economic and Industry Forecasting Joel Kan, in a statement. “The decline was driven by a sharp decrease in the conventional credit space, as we saw the expiration of the Home Affordable Refinance Program (HARP).  Credit availability in government loans was stable over the month, ticking up slightly. We also saw a decline in high balance and super conforming programs, which drove the decline in the jumbo index.”

Now for the good news: Homeowners who currently owe more on their mortgage than their property is worth, still have options.

HARP was created as a temporary relief program in response to the overwhelming number of homeowners who lost equity as a result of the Great Recession. However, there are two new programs offered by Fannie Mae and Freddie Mac that are permanently in place. Fannie’s is the High LTV Refinance Option and Freddie’s is the Enhanced Relief Refinance. Both programs offer refinancing solutions to eligible borrowers and there’s no limit to how many times people can use it.

There are a few other key differences between these new programs and HARP that borrowers should be aware of:

  • While HARP did not have a loan age requirement, the Fannie and Freddie programs require a loan to be at least 15 months old before they’re eligible for refinancing.
  • HARP required mortgage originations before May 31,2009. Fannie and Freddie’s programs are for mortgages that have an application-received date on or after November 1, 2018.

One thing that remains the same between HARP and the new programs from Fannie and Freddie–they are not meant for people who are behind on their mortgage payments. These refinancing programs were created to help homeowners who could not qualify for other types of refinancing due to lack of equity. Homeowners will need to show their lender a history of regular, on-time payments in order to qualify.

To see the full details and requirements of Freddie Mac’s Enhanced Relief Refinance program, click here.

To view Fannie Mae’s program details and requirements, click here.

There are other ways homeowners can attempt to regain equity without necessarily having to refinance. If refinancing is not an option, one way to build equity would be to improve the home. Adding upgrades that contribute to your home’s value such as kitchen remodeling, can help give your equity a boost. Another option would be to pay more toward your mortgage’s principal balance. Most mortgage companies typically allow homeowners to pre-pay up to 10% without penalty.

Read our blog post, “Tips for Dealing With Negative Equity” for more information.

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