Freddie Mac used to offer refinancing programs for borrowers who had minimal equity on their properties. Their FMERR program came to an end this past September, however, it is something they have extended in the past. The following article will go over the program’s fundamentals, as well as point out another option.
The Freddie Mac Enhance Relief Refinance program helped borrowers who made payments punctually, but had homes that had lost enough equity, to the point where they ended up on the upside-down of the loan. With high LTV (loan-to-value) ratios, borrowers weren’t able to capitalize on low rates that they would usually qualify for if they were refinancing.
This program helped homeowners capitalize on modern home rates in spite of having high LTV ratios. Borrowers who were facing the upside-down of their loans (i.e., they owed a lot more than the value of the home) were also helped by it.
You need the following to be eligible:
- Your existing loan must have been held for a minimum of 15 months.
- The loan must be owned by Freddie Mac.
- A 97% or greater LTV is required.
As mentioned earlier, this program is no longer active.
WHAT HAS THE FANNIE MAE HARP BEEN REPLACED WITH?
Some borrowers may still qualify for the Fannie Mae High LTV Refinance Option, which replaces the Fannie Mae HARP (Home Affordable Refinance Program).
Four eligibility, you must:
- Have created your mortgage on October 1, 2017, or afterward.
- Have not used HARP benefits yet.
- Have a Fannie Mae – owned mortgage.
The Fannie Mae High LTV program comes with a number of benefits, including the following:
- More mortgage insurance won’t be paid on a loan, and that includes if high LTVs are involved. You pay only if you have an MI currently, since it will be transferred to your loan.
- No credit score minimum.
- No debt ratio maximum.
- Streamlined paperwork.
WHY USE THE FANNIE MAE HIGH LTV REFINANCE PROGRAM
The Fannie Mae FMERR alternative can only be used for these reasons:
- Change the type of loan (ARM from fixed rate).
- Change the terms of the loan.
- Reduce monthly payments.
- Reduce interest rates.
Eligibility for this program is available if your payments have been made on time, though. As required by Fannie Mae, you must prove that the last years’ worth of payments were punctual. In other words, there must be no record of late payments (over one month). Also, you are limited to one payment that is 30 days late over the last year.
Automated underwriting is offered by this program in order to help you. Many borrowers are not required to pay for appraisals, as they are able to obtain appraisal waivers. An automated system establishes a home’s value before using it for valuation reasons. Because this program is for borrowers who are either underwater or approaching it, paying for appraisals is unnecessary.
Automated underwriting alleviates a lot of paperwork that borrowers generally must complete in order for a mortgage to be refinanced. Because the purpose of this program is to help borrowers afford payments more, and because the central eligibility requirement involves punctual payments for a higher payment that already exists, they simply do not warrant too much paperwork to be filled out.
WILL FMERR MAKE A RETURN?
This program has disappeared and returned more than once over the last several years, so it stands to reason that a return could happen. Freddie Mac has not taken down information about the program on their official website, and there aren’t any indications that the program has completely ended, as opposed to HARP, which closed at the end of 2018. Meanwhile, borrowers may qualify for Fannie Mae’s alternative program.
High LTV refinance programs can help you capitalize on the low rates available these days, or they can help you find your way out of risky loans (like an ARM), regardless of what your LTV is. They can help make mortgage payments more affordable. They can also make payments stable enough so that your payments are affordable. These programs will help you own your property eventually. If your long-term plans do not involve staying in a home, reducing an interest rate on it will help you reduce the principal with every payment you make. As such, you will be able to earn a bigger profit when the time comes to sell the property.