A Fannie Mae loan program to help low-equity homeowners refinance was paused in January 2023, five years after it replaced the federal government’s HARP refinance.
In March 2009, the federal government started the Home Affordable Refinance Program (HARP) to provide refinancing to homeowners with limited or no equity. The program expired in December 2018 after serving almost 3.5 million borrowers. For a while, there was a Fannie Mae HARP refinance replacement program called HIRO, short for High LTV Refinance Option.
However, in January 2023, Fannie Mae paused the program and has not yet reopened applications. Here, we’ll give a brief history of the Fannie Mae program.
What Was the Home Affordable Refinance Program?
The Federal Housing Finance Agency launched the Home Affordable Refinance Program in response to the 2008 housing bubble burst. During the crisis, many homes’ values dropped below homeowners’ mortgage balances, resulting in some people having negative equity.
This prevented homeowners from refinancing their home mortgage or receiving a home equity line of credit (HELOC) since they owed more than their houses were worth.
To help with this, the federal government created HARP so homeowners with a loan-to-value (LTV) ratio above 80% could refinance. Most banks only allow refinancing for those with an LTV of 80% or lower.
Why Did the Home Affordable Refinance Program End?
The Home Affordable Refinance Program largely ended because those who were eligible took advantage of it, leading to a decline in applications by late 2018. Fannie Mae launched its version of the program, HIRO, but paused it in January 2023 for the same reason.
Michelle White, a national mortgage expert at The CE Shop, said HIRO was primarily for homeowners who wanted to change their interest rate or switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage.
“A lot of borrowers took on ARM loans when rates and home prices were climbing, especially in the Non-QM (Non-Qualified Mortgage) market,” White says. “Some of these borrowers might struggle with higher payments, potentially leading to foreclosure.”
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Benzinga has offered investment and mortgage advice to more than one million people. Our experts include financial professionals and homeowners, such as Anthony O’Reilly, the writer of this piece. Anthony is a former journalist who’s won awards for his coverage of the New York City economy. He’s navigated tricky real estate markets in New York, Northern Virginia and North Carolina.
For this story, we worked with Michelle White, a national mortgage expert at The CE shop, an online real estate educational service.
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Sources
- Michelle White, national mortgage expert at The CE School
About Anthony O'Reilly
Anthony O’Reilly is an updates editor for Benzinga. He’s won numerous journalism awards for his coverage of the New York City economy and Long Island school district budgets.