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HARP Replacement Programs: How the HIRO Mortgage Program and FMERR Work

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The Home Affordable Refinance Program, or HARP, was created in the wake of the 2008 housing crisis to help homeowners refinance underwater home loans and avoid losing their homes to foreclosure. An underwater or upside-down mortgage means a borrower owes more on the loan than what the home is currently worth.

HARP ended in 2018, but HARP replacement programs are now filling the void with new refinance options for struggling homeowners.

What was HARP?

The Home Affordable Refinance Program, or HARP, was created by the Federal Housing Finance Agency (FHFA) in 2009 to help struggling homeowners keep their homes and refinance upside down, or “negative equity” loans. Negative equity measures the difference between your loan balance and your home’s value. For example, if your house is worth $160,000 but you owe $200,000, then you have 25% negative equity.

Before the HARP program was created, lending guidelines made it virtually impossible to refinance a mortgage if the loan balance exceeded the home’s value. HARP expired in 2018.

HARP replacement programs

Although the housing crisis has subsided, struggling homeowners still needed a safety net in HARP’s absence. In its place, Fannie Mae and Freddie Mac, government-sponsored enterprises which fuel the U.S. mortgage market, created two HARP replacement programs:

  • The Fannie Mae High Loan-to-Value (LTV) Refinance Option (HIRO). The HIRO program allows homeowners with a loan serviced by Fannie Mae to refinance even if their loan balance is higher than their home’s value. The HIRO program also permits manual underwriting to help upside-down homeowners with special circumstances.
  • The Freddie Mac Enhanced Relief Refinance® (FMERR). Created for underwater borrowers who currently have a Freddie Mac-serviced loan, FMERR can help homeowners benefit from a lower payment or faster payoff with no minimum credit score requirement.

The programs aim to help distressed homeowners with underwater mortgages by accomplishing one (or several) of the following goals:

  • A lower payment
  • A lower interest rate
  • A shorter loan term
  • A more stable loan product

Do you need to refinance with a HARP replacement program?

If you had an underwater mortgage in 2019, there’s good news in 2020: The number of homes with negative equity decreased by 15% in the second quarter of 2020 compared to last year, according to data from the 2020 CoreLogic Homeowner Equity Insights report. Despite the improvement, there are still several states with a significant share of negative-equity homes.

If you live in a state that has a “high” or “very high” share of negative-equity properties, you might benefit from a HARP replacement program sooner than later.

States with the highest share of negative-equity homes through Q2 2020

Very high percentage of negative equity High percentage of negative equity
Louisiana – 9.3% Oklahoma – 4.9%
Illinois – 6.5% New Jersey – 4.8%
Connecticut – 6.4% Delaware – 4.7%
Iowa – 5.8% Maryland – 4.5%
Arkansas – 5.0% New York – 4.5%
Florida – 4.3%
North Dakota – 4.3%
Michigan – 4.2%
Kentucky – 4.0%
Wisconsin – 4.0%

Source: 2020 CoreLogic Homeowner Equity Insights Report

Benefits of HARP replacement programs

If you live in an area of the U.S. with a higher share of negative equity, you may benefit from one of the HARP replacement programs. Here are some of the features of the new HARP replacement programs that may help you save money on an underwater mortgage refinance:

  • You can use them more once. Mortgage rates tend to rise and fall over time, and the original HARP program gave borrowers only one shot at a lower rate for the life of their loan. The new HARP replacement programs allow refinancing as often as it makes financial sense, so long as they meet other requirements.
  • Your mortgage insurance transfers to the new loan. If you put down less than 20% on your mortgage, you’re probably paying for private mortgage insurance (PMI). Even if your home value has dropped, you won’t need new mortgage insurance coverage, because the current PMI will transfer to the new loan.
  • You won’t need to purchase new PMI. If you don’t have PMI now, it won’t be required on the new loan, even if you have less than 20% equity or negative equity.
  • You won’t need as much financial paperwork. Lenders are not required to document income or assets with as much documentation as a standard refinance.
  • You may qualify with a low or higher DTI ratio. Even if you’ve racked up debt or your credit score has fallen, you may still qualify. That’s because, in most cases, lenders don’t analyze your debt-to-income (DTI) ratio, a measure of your total monthly debt compared to your gross monthly income.
  • You may get an appraisal waiver. Depending on the location of your home and the results of an automated value analysis, an appraisal may not be required. That can save you $300 to $400 on the average cost of a home appraisal.
  • You may qualify even with major recent financial and credit problems. The standard waiting periods for bankruptcy discharges and foreclosures may not apply to HARP replacement programs. However, your credit scores need to be high enough to get a reasonable interest rate to make the refinance worthwhile.

HARP replacement program requirements

HIRO program

You’re eligible for the Fannie Mae High-LTV Refinance Option (HIRO) if:
  • You currently have a Fannie Mae-serviced loan.
  • The note date on your current loan is on or after Oct. 1, 2017.
  • It’s been at least 15 months since you took out your current mortgage.
  • You haven’t been late on your mortgage payment in the last six months.
  • You’ve had only one late payment in the last 12 months.
  • You don’t have more than 3% equity (for a single-family primary residence).


FMERR program

You’re eligible for the Freddie Mac Enhanced Relief Refinance Mortgage (FMERR) if:
  • You currently have a Freddie Mac-serviced loan.
  • It’s been at least 15 months since you took out your current mortgage.
  • You haven’t been late on paying your current mortgage in the last six months.
  • You don’t have more than one late mortgage payment in the last 12 months.
  • You don’t roll more than $5,000 in closing costs into the loan amount and receive a maximum of $250 cash back.

How do I apply for a HARP replacement program?

There are four steps to applying for the Fannie Mae HIRO mortgage program or the FMERR. (Note: You won’t be eligible for either program if your current loan was already refinanced under the HARP program.)

  1. Confirm that your current loan is serviced by Fannie Mae or Freddie Mac. Here’s how to do it:
    -Use the Fannie Mae loan look-up tool or call 800-2FANNIE
    -Use the Freddie Mac loan look-up tool or call 800-FREDDIE (press 2 for a customer service representative)
  2. Find out what your current lender offers. Because your current loan servicer already knows who backs your loan, start your rate shopping with them. They might make you a competitive offer to keep you as a customer.
  3. Find a lender that offers HARP replacement programs. Once you’ve confirmed which agency services your loan, get offers from other lenders that offer HARP replacement programs (you’ll need to ask them when you contact them). A mortgage rate comparison tool saves time since lenders will only contact you based on the information you input. Once you’ve compared all of the figures, choose the option with the lowest rates and fees.
  4. Fill out a loan application and follow your loan officer’s guidance. Lenders that offer HARP replacement loans are mostly focused on the benefit of your refinance and how well you’ve managed your mortgage payments in the last 12 months. They’ll verify your payment history to approve the loan and your credit score to offer you a rate.

Other ways to refinance an underwater mortgage

If you’re struggling to make your mortgage payments, you have other options to refinance an underwater loan, even if your current mortgage isn’t held by Fannie Mae or Freddie Mac. Here are some options to consider:

FHA streamline refinance

If you currently have a loan insured by the Federal Housing Administration (FHA), you may qualify for the FHA streamline refinance program. There’s no appraisal or income verification, and lenders don’t factor in your home’s current value. Your mortgage payment history primarily determines your eligibility. Another perk: no minimum credit score requirement.


Military borrowers with a current loan guaranteed by the U.S. Department of Veterans Affairs (VA) may be eligible for the VA interest rate reduction refinance loan (IRRRL). Income isn’t verified, and there’s no minimum credit score or home appraisal required.

USDA streamline refinance

If you own a home in a rural area with a loan backed by the U.S. Department of Agriculture (USDA), you may be able to refinance with the USDA streamline assist refinance program. To qualify, you must’ve paid your current USDA loan on time in the last 12 months. No income verification or appraisal is required, and you might save money with a refi, regardless of your home’s value.

Mortgage modification

If you don’t meet any of the criteria for HARP replacement programs or government streamline refinance loans, ask your lender for a mortgage modification. The lender’s servicing department may be able to reduce your payment by extending the term of your loan or temporarily lowering your monthly payment.

Mortgage recasting

If you’ve come into a large sum of money, you can use it to pay down your loan balance and ask the lender to recast your mortgage. This means your mortgage payment is adjusted based on the new balance, effectively lowering your payment without going through a full refinance.


Today's Refinance Rates

  • 2.76%
  • 2.16%
  • 2.70%
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