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Enhanced Relief Refinance Program
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Enhanced Relief Refinance Program

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

The Enhanced Relief Refinance Mortgage Program enables borrowers whose mortgage exceeds the value of their home to refinance with much more flexible qualification guidelines. The program, which replaced the HARP 2.0 Program as of 2019, is designed to help people who are underwater on their homes refinance into more affordable mortgages with more manageable monthly payments. The program eliminates many of the requirements that apply to standard refinance refinance programs, potentially making it easier for distressed borrowers to qualify and refinance your mortgage.

Similar to its predecessor program, HARP 2.0, the Enhanced Relief Refinance Program does not use a maximum loan-to-value (LTV) ratio, which means that you may be able to refinance your mortgage despite being significantly underwater on your loan. Additional advantages of the Enhanced Relief Refinance Program include not requiring an appraisal report in many cases and no minimum credit score requirement or maximum debt-to-income ratio for most borrowers.

Additionally, the program applies more relaxed income verification requirements and does not require borrowers to hold financial reserves at closing, although this is usually a good idea. In short, the Enhanced Relief Refinance Program’s flexible eligibility guidelines make it a compelling option for people who cannot qualify for standard refinance programs.

How the Enhanced Relief Refinance Program Works

The first step with the program is to determine if your loan is eligible and you qualify for the program. Unlike a regular mortgage refinance which focuses on your LTV ratio and how much equity you have in your home, the Enhanced Relief Refinance program focuses more on your current loan status and recent payment history.

Borrowers who are eligible for the Enhanced Relief Refinance Program apply through approved lenders such as banks, mortgage banks, mortgage brokers and credit unions. These approved lenders make sure that your loan is eligible and that you meet program qualification guidelines. Even if your current lender offers the program you are not required to work with that lender and you should shop multiple lenders to find the best refinance terms.

The table below shows mortgage rates and fees for leading refinance lenders. We recommend that you contact multiple lenders to determine if they offer the Enhanced Relief Refinance Mortgage Program or other distressed refinance options. Comparing the terms for several refinance programs enables you to find the option that is right for you and save money on your mortgage.

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Current Refinance Mortgage Rates in Ashburn, Virginia as of November 27, 2020
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Data provided by Brown Bag Marketing, Inc. Payments do not include amounts for taxes and insurance premiums. Read through our lender table disclaimer for more on rates and product details.
Enhanced Relief Refinance Mortgage Program Considerations
Pros
  • Ability to refinance an underwater mortgage
  • Potentially reduce mortgage payment and principal balance
  • No minimum credit score or maximum debt-to-income ratio for most applicants
  • No income limit
  • Uses super conforming loan limits
  • Primary residences and non-owner occupied properties are eligible
Cons
  • Freddie Mac must own or secure mortgage
  • No late payments or delinquencies in the past six months
  • Loan eligibility requirements limit program participation
Enhanced Relief Refinance Program Eligibility

We review the key program eligibility guidelines below. The most important step is to determine if your mortgage is eligible for the program.

Freddie Mac Must Own or Secure Your Loan

To be eligible for the Enhanced Relief Refinance Program, your mortgage must be owned or secured by Freddie Mac, which is one of the two largest government-sponsored enterprises (GSEs) that provide capital to and buy mortgages from lenders (Fannie Mae is the other major GSE and offers the High LTV Refinance Option). You do not obtain your mortgage directly from Freddie Mac but in many cases your mortgage is sold to them and you continue to make your payment to your original lender.

So even if you make your monthly payment to Quicken Loans or Citibank your mortgage may actually be owned or secured by Freddie Mac. In fact no one actually makes their mortgage payment to Freddie Mac so do not let that deter you from determining if you are eligible for the program. You can use Freddie Mac's loan look-up tool to determine if they own or secure your loan.

Borrower Benefit

An Enhanced Relief Refinance Mortgage must offer the borrower at least one of the following benefits: a reduction in mortgage rate or monthly payment, replacing an adjustable rate mortgage (ARM) with a fixed rate mortgage or reducing the length of your loan.

Original Mortgage Closing Date

Your original mortgage must have closed on or after October 1, 2017. So if your mortgage closed before October 1, 2017 you are not eligible for the Enhanced Relief Refinance Program.

Loan Cannot Be a HARP Mortgage

You cannot use the Enhanced Relief Refinance Program to refinance a HARP mortgage. If you modified your existing mortgage with another loan modification or refinance assistance program you may be eligible for the program.

Mortgage Seasoning

Mortgage Seasoning basically means how old your mortgage is and your loan must be seasoned for at least 15 months to be eligible for the program. In short your mortgage must have closed at least 15 months before you apply for an Enhanced Relief Refinance.

Mortgage Status

To qualify for the program borrowers must be current on their loan and not delinquent.

Payment History

Borrowers cannot have missed a mortgage payment within the past six months and no more than one 30 day late payment in the past twelve months.

Repeat Usage of Program is Not Allowed

Under most circumstances you cannot use the Enhanced Relief Refinance Program more than once.

Enhanced Relief Refinance Borrower Qualification Requirements

We outline borrower qualification requirements for the Enhance Relief Refinance Program below. Review this information to determine if you qualify.

Borrower Credit Score

The Enhanced Relief Refinance Program does not require a minimum credit score for most applicants as long as your new monthly mortgage payment does not increase by more than 20%. Please note that although program guidelines do not require a credit score some lenders may review your credit report and score to satisfy their internal underwriting requirements. If a lender declines your application due to low a low credit score, you should contact other lenders to determine if you can get approved as underwriting requirements vary by lender.

Borrower Debt-to-Income Ratio

The Enhanced Relief Refinance Program does not apply a maximum borrower debt-to-income ratio for most applicants which makes it ideal if your income or monthly debt expense has changed since you obtained your original mortgage. Your debt-to-income ratio represents the maximum amount of your monthly gross income that you can spend on your mortgage payment, property tax, hazard insurance and other debt expenses including credit cards and car, student and personal loans. Not applying a maximum debt-to-income ratio makes it easier to qualify for the Enhanced Relief Refinance Program.

Please note that some lenders may apply their own maximum debt-to-income ratio -- usually 45% -- and most lenders confirm that applicants have the financial ability to repay their new mortgage.

Borrower Income Verification

Program guidelines require lenders to verify your income although they do not need to confirm that that your income is expected to continue for at least three years, which is a lower standard than other mortgage refinance programs.

Borrower Income Limit

Unlike some other refinance assistance or loan modification programs, the Enhanced Relief Refinance program does not apply borrower income limits.

Employment History Requirement

Borrowers are not required to have a two year employment history to be eligible for the program.

Loan-to-Value (LTV) Ratio

The Enhanced Relief Refinance Program does not apply a maximum loan-to-value (LTV) ratio which makes it ideal for home owners who are underwater on their mortgage. For example, if your home is valued at $250,000 and your loan balance is $275,000, your are underwater on your mortgage because your home is worth less than what you own on your mortgage. It is usually impossible to refinance your mortgage if you are underwater on your mortgage.

The no LTV ratio rule only applies if you refinance with a fixed rate mortgage. The maximum LTV ratio if you refinance into an adjustable rate mortgage (ARM) is 105%.

While the Enhanced Relief Refinance Program does not apply a maximum LTV ratio for most applicants, it does use a minimum LTV ratio. The program is designed for underwater or distressed borrowers rather than borrowers with significant homeowners equity. As outlined in the table below the minimum LTV ratio varies by property type and the number of units in the property.

Residence Type
Number of Units
Minimum LTV Ratio
Primary Residence
  • One unit
  • 97.01%
  • Two units
  • 85.01%
  • Three and four units
  • 80.01%
Second / Vacation Home
  • One unit
  • 90.01%
Investment Property
  • One unit
  • 85.01%
  • Two-to-four units
  • 75.01%

Appraisal Report Requirement

Because the Enhanced Relief Refinance Program does not use a maximum LTV ratio, lenders may not require an appraisal report for one or two unit properties, which saves you money and time. If lenders are able to obtain an estimated property value through Freddie Mac’s Home Value Explorer (HVE) service, an appraisal report is typically not required.

If an estimated property value is not available through Home Value Explore or the property has three or four units, then a new appraisal report is usually required. Additionally, some lenders may order an appraisal report to meet internal or regulatory requirements. We advise you to check with your lender to do determine if you need an appraisal report before you apply for the program.

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Other Program Guidelines

Mortgage Program

15, 20 and 30 year fixed rate mortgages and 5/1, 7/1 and 10/1 adjustable rate mortgages (ARMs) are eligible for the Enhanced Relief Refinance Program (assuming your original mortgage was an ARM). Borrowers cannot refinance into an interest only mortgage according to program guidelines.

Loan Limits

The program applies super conforming loan limits, which vary by county and the number of units in a property. The conforming loan limit in the contiguous United States for a single unit property ranges from $510,400 to $765,600 in higher cost counties. The super conforming mortgage limit ranges from $981,700 to $1,472,550 for a four unit property. In Alaska, Hawaii, Guam and the U.S. Virgin Islands the loan limit is $765,600 for a single unit property.

Type of Refinance

The Enhanced Relief Refinance Program only permits rate and term refinances which means that the only terms of your mortgage that can change are your program, interest rate and loan length. In most cases borrowers lower their mortgage rate but keep their loan length the same with their new loan. You can also finance up to $5,000 in closing costs in your mortgage amount and take out a maximum of $250 in loan proceeds. Cash-out refinances are not permitted according to program guidelines.

Property Eligibility

One-to-four unit owner occupied and investment properties are eligible for the program. Single unit second or vacation homes including manufactured homes are also eligible.

Prepayment Penalty

Your original mortgage may have a prepayment penalty if you refinance with the program but your new mortgage should not have a prepayment penalty.

No Waiting Periods After Negative Credit Events

Standard mortgage refinance programs require applicants to wait several years after a negative credit event such a bankruptcy, foreclosure or default before they can apply for a mortgage.  The Enhanced Relief Refinance Program does not apply waiting periods after negative credit events before you can apply for the program.

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Program Costs and Fees

Mortgage Rate

In general, mortgage rates for Enhance Relief Refinance loans are higher than rates for regular refinances. Interest rates vary by lender, applicant and other factors so you should shop multiple lenders to find the mortgage with the lowest interest rate and fees.

Closing Costs

You are required to pay standard lender fees and closing costs. Total closing costs for the Enhanced Relief Refinance Program are similar to a standard refinance and applicants should not be required to pay any extra fees to apply for the program. If a lender attempts to charge you extra costs or upfront fees to use the program you should switch lenders.

Private Mortgage Insurance (PMI)

According to Enhanced Relief Refinance Program guidelines, if your existing mortgage has private mortgage insurance (PMI), you are required to have the same level of PMI coverage on your new new loan. If your existing mortgage does not have PMI, then you are not required to pay PMI on your new loan, even if your new LTV ratio exceeds 80%.

Hardest Hit Fund Program

You may be eligible to apply for the Hardest Hit Fund Program to reduce your mortgage balance or help pay for closing costs when you refinance with an Enhanced Relief Refinance mortgage. The Hardest Hit Fund Program is designed to help homeowners in areas that were most impacted by the real estate crisis and decline in property values. Applicants should contact their state housing agency to determine if they are eligible for assistance.

Program End Date

The Enhanced Relief Refinance Program currently has no expiration date which means it should be available to borrowers for the foreseeable future.

Related FREEandCLEAR Resources

Sources

"Enhanced Relief Refinance Mortgage."  Origination & Underwriting.  Freddie Mac, 2020.  Web.

About the author
Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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