Mortgage relief and Congress mortgage stimulus in 2021

Maggie Overholt
The Mortgage Reports editor

Is there a Congress mortgage stimulus program?

With Covid-era relief efforts winding down, some Congress mortgage stimulus programs are coming to a close.

Fortunately, homeowners who need to lower their mortgage payments are not out of options.

Millions of homeowners are still refinance eligible. And with a wide variety of mortgage programs available, even those with little or no equity might qualify for a lower rate and cheaper monthly payment.

Verify your refinance eligibility. Start here (Dec 4th, 2021)

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>Related: The best way to refinance your mortgage

Mortgage relief programs for 2021

If you’ve had a temporary job loss or reduction in income, it can be hard to keep up with mortgage payments — especially if you have an above-market mortgage rate that’s keeping your payments artificially high.

The simple solution is to refinance into a lower interest rate and cheaper mortgage payment.

Thanks to rising home values, even homeowners who made a very small down payment or refinanced recently could be eligible for today’s low-interest rates.

Even if you don’t think you’d qualify for a refinance, it’s worth talking to a lender. Many homeowners are eligible but don’t know it yet.

What’s more, not everyone needs great credit or perfect finances to qualify for a refinance.

Select programs, like the government-backed Streamline Refinance, can help borrowers refinance with little, no, or negative home equity.

Even if you don’t think you’d qualify for a refinance, it’s worth talking to a lender.

Homeowners might be surprised at the amount of equity they’ve gained in today’s hot housing market. And with rates still near record lows, many borrowers can easily save hundreds every month.

Those savings could put some cushion back in your budget and seriously improve your personal finances.

Verify your refinance eligibility. Start here (Dec 4th, 2021)

Congress mortgage relief programs (Covid-19 mortgage relief)

Homeowners who have experienced financial hardship during the pandemic have a few options for mortgage relief.

To help borrowers struggling with mortgage payments due to unemployment or illness, Congress enacted certain mortgage stimulus programs as part of the CARES Act.

Many of these assistance programs have been extended into 2021 to help those who are still struggling financially.

If you find yourself in need of financial assistance, current options include:

Mortgage forbearance

Loan forbearance temporarily pauses your monthly mortgage payments while you’re going through financial hardship. The debt isn’t forgiven — you’ll have to make up the missed payments after forbearance ends — but this can provide some breathing room while you get back on your feet financially.

Your current forbearance options depend on what type of mortgage loan you have, and whether you’ve used a forbearance plan previously.

  • Conventional loans (backed by Fannie Mae or Freddie Mac) — If you were in a forbearance plan as of February 28, 2021, you can request up to two 3-month extensions. If you have not yet requested forbearance, you can still do so. There is currently no deadline for requesting initial loan forbearance on conventional mortgages
  • Government-backed loans (FHA, VA, or USDA) — If you were in a forbearance plan before June 30, 2021, you can request up to two additional 3-month extensions. If you have not yet requested an initial forbearance, the deadline to do so is September 30, 2021

Source: Consumer Financial Protection Bureau (CFPB)

One your forbearance period reaches its end date, you’ll have a few options for how to exit forbearance and repay your missed loan payments.

Importantly, your loan servicer cannot ask you to repay everything as a lump sum right after exiting forbearance. It’s more likely you’ll pay the missed amount in installments along with your regular mortgage payments or defer repayment until you sell the home or refinance.

Refinance after forbearance

In the past, it could be difficult to refinance your home loan after having been in a forbearance plan. But those rules have loosened up due to the unprecedented spike in mortgage forbearance during Covid.

Now, it’s possible for many homeowners to refinance as little as three months after ending their forbearance plans.

Rules can vary by loan program and mortgage lender. So talk to a loan officer or mortgage broker to learn whether you’re refinance eligible.

Loan modification

For homeowners who need to exit forbearance but don’t qualify for a refinance, a final option could be a loan modification.

Modification is for homeowners who have had a permanent — rather than a temporary — change in their financial circumstances. This involves your loan servicer agreeing to lower your rate or extend your loan term to make the mortgage payments more affordable.

Homeowners with FHA, VA, and USDA loans might even be able to take advantage of Biden’s new mortgage stimulus program that lowers payments by as much as 25% via a loan modification.

However, loan modification is typically seen as a last resort for homeowners who can’t refinance or take advantage of other mortgage relief programs.

Before you pursue this route, it’s worth checking whether you can refinance into a lower rate and reduce your mortgage payments that way.

Streamline refinancing for FHA, VA, and USDA loans

Popular mortgage relief programs since 2009 (including HARP, HAMP, FMERR, and HIRO) have only been available to homeowners with conventional mortgages backed by Fannie Mae or Freddie Mac. 

But what if your loan is government-backed? 

Homeowners with federally-backed FHA, VA, and USDA mortgages have access to different mortgage programs than those with conventional loans. 

Namely, they can use a Streamline Refinance.

The Streamline Refinance is a special mortgage refi program for people with government-backed loans.

It’s similar to a mortgage relief refinance, because you can use a Streamline Refi even if your home is underwater or has very little equity. 

And a Streamline Refinance has other benefits, too.

  • There’s less paperwork because you don’t have to re-verify your income or employment or get the home appraised
  • Government-backed loans typically have below-market mortgage interest rates
  • Closing costs are typically cheaper

Homeowners can qualify for an FHA Streamline if they’ve made at least three consecutive on-time payments on their existing FHA loan.

Even if you make your three consecutive payments while in forbearance, you may qualify for FHA Streamline refinancing. The Department of Housing and Urban Development (HUD), which oversees the Federal Housing Administration, is one of the more lenient housing agencies.

For a VA Streamline Refinance (also called the ‘IRRRL’), the rules are more lenient.

You can use this refinance even if your current loan is delinquent. However, the lender must verify that the reason for delinquency has been resolved and you’ll be able to make payments on the new loan.

Find out if you qualify for a Streamline Refinance (Dec 4th, 2021)

HIRO: The High-LTV Refinance Option

Editor’s Note: As of August 31, 2021, Fannie Mae paused the HIRO initiative because very few applicants were taking advantage of the program. It is likely the program’s lack of use is due to rising property values and the resulting increases in home equity. You may find that you have more equity in your home than you originally thought due to recent increases in property values. 

Fannie Mae’s High-LTV Refinance Option (HIRO) allows homeowners to refinance with no equity or an underwater loan. And there’s no maximum LTV ratio

However, only homeowners whose mortgages are currently owned by Fannie Mae can qualify. (You can find out whether your mortgage is a Fannie Mae loan using this lookup tool.)

Other conditions to use the high LTV refinance option include: 

  • Your loan-to-value ratio is at or above 97.01 percent for a single-family home (see a full list of HIRO LTV requirements here
  • Your loan was originated on or after October 1, 2017
  • You have a history of on-time mortgage payments
  • You have no more than one late payment in the last year, and none in the last 6 months

And, importantly, you need a “net tangible benefit” to qualify for HIRO. 

That means there must be a clear reason for your refinance — whether it’s a lower monthly payment, a shorter loan term, or a switch from an adjustable-rate mortgage to a safer fixed-rate mortgage. 

You can find out whether you meet the guidelines for a HIRO refinance by checking with a lender.

Verify your refinance eligibility. Start here (Dec 4th, 2021)

FMERR: The Freddie Mac Enhanced Relief Refinance

Editor’s Note: Freddie Mac has paused its FMERR program effective August 31, 2021. The agency cited “extremely low volume” as a reason for pausing the program. We recommend that you check with a lender to learn whether you’re refinance eligible. You may have more home equity than you realize thanks to rapidly rising home values across most of the nation.

FMERR — which stands for the Freddie Mac Enhanced Relief Refinance — is Freddie’s version of a high-LTV program.

You can check Freddie’s loan lookup tool to see whether the agency owns your loan.

Requirements to qualify for an Enhanced Relief Refinance include:

  • Your loan-to-value ratio is at 97.01 percent or higher for a single-family, primary residence
  • Your loan was originated on or after November 1, 2018
  • You’ve had the loan for at least 15 months
  • You have no late mortgage payments in the last 6 months, and no more than 1 in the last year

The FMERR program can be used for existing fixed-rate mortgages and adjustable-rate mortgages.

And, FMERR is not limited to single-family homes or ‘primary residences.’ Homeowners with 2-,3-, and 4-unit homes, as well as second homes and investment properties, can qualify as long as they meet other eligibility requirements.

A mortgage lender can tell you whether you qualify for this refinance option. You do not have to refinance with your current lender.

Verify your refinance eligibility. Start here (Dec 4th, 2021)

Veteran mortgage relief options

One benefit of a VA loan is that the Department of Veterans Affairs can help you out if you’re having trouble making mortgage payments.

Veteran mortgage assistance comes in two forms:

  • You could use a Streamline Refinance loan (IRRRL) to lower your rate and payment
  • You could get help from a VA loan professional to figure out your repayment plan

If you’re underwater on a VA loan and need to refinance, you may be able to use the VA Streamline Refinance (IRRRL) to do so. 

Like other Streamline programs, the IRRRL requires no income or employment check, and skips the home appraisal — so your LTV won’t matter. 

If you’re not sure whether a refinance is right for you, you might take advantage of the other VA relief program. 

For VA loan holders as well as veterans with non-VA mortgages, the VA offers access to professional counselors who can help you if you’re having trouble making your payment.

These people help veterans figure out whether they should refinance, try to restructure their loan, or take another measure to prevent foreclosure. 

Even better, the VA’s “loan technicians” work with your lender on your behalf — so you don’t have to figure out all the logistics of a mortgage relief program yourself. 

What is a mortgage relief refinance?

When most people think of government or Congress mortgage relief, they’re thinking of HARP — the Home Affordable Refinance Program. 

HARP was a government program rolled out by the Federal Housing Finance Agency in 2009. For nine years, it helped millions of homeowners refinance after being hard-hit by the housing crisis. 

The HARP program ended in 2018. 

But many homeowners were still underwater on their mortgages — especially in areas where home values have fallen instead of rising in recent years. 

So Fannie Mae and Freddie Mac created similar relief programs, called HIRO and FMERR, to help homeowners refinance with little or no home equity.

The federal government also offers mortgage relief via the FHA, VA, and USDA Streamline Refinance programs. These low-doc refinance loans don’t require a home appraisal, so homeowners can refinance even if they have very little home equity or if their home values have fallen.

How a mortgage refinance relief program works

The idea behind a mortgage relief refinance program is to help homeowners lower their mortgage rates. In turn, their monthly payments become more affordable.

Relief refinance incentives have helped millions of homeowners avoid mortgage delinquencies and even foreclosure.

But why are relief refinance programs necessary in the first place? 

Well, typically, homeowners can’t refinance unless their mortgage is below a certain loan-to-value ratio (LTV). That means they need a minimum amount of home equity — and borrowers who made a very small down payment when they purchased the home, or whose home values have fallen, might not meet the threshold.

Luckily, a relief refinance solves this problem.

How much equity do you need to refinance?

Loan-to-value is the amount you owe on your home loan compared to the home’s current value. 

For example, if your home is worth $100,000 and you owe $97,000 on your mortgage, you have a 97 percent loan-to-value ratio. 

Incidentally, 97 percent is typically the maximum LTV to qualify for a conventional refinance

When a home’s value drops faster than the owner is paying off their mortgage, their LTV can suddenly spike above that 97 percent benchmark. This makes them ineligible for a refinance under normal rules. 

Using the example above, say home values start dropping, and that $100,000 home is suddenly worth $90,000. 

The homeowner still owes $97,000 on their mortgage. So their new loan-to-value ratio is 108 percent (97/90=1.08). They are no longer allowed to refinance, and might be stuck with a mortgage payment they can’t afford. 

Refinancing with a high loan-to-value

Mortgage relief programs flip the rules around.

Instead of staying under a maximum LTV ratio, your loan must be at or above a minimum LTV ratio. 

For instance, Fannie Mae’s HIRO program and Freddie Mac’s FMERR program could only be used with an LTV at or above 97.01 percent. That means the homeowner could only refinance if they had 3 percent equity or less in the home.

The good news is, home equity has skyrocketed as bidding wars force home values up across the nation. That means current homeowners — even those who aren’t planning to sell — have seen their equity increase.

The result is that high-LTVs are no longer an issue for many Americans. With home values up, many owners are refi eligible — they just don’t know it yet.

Save more with a mortgage refi program in 2021

For homeowners struggling with their mortgage payments, it’s a wise time to refinance. 

Taking advantage of a high-LTV refinance or even a standard refinance, could have huge benefits. 

Verify your new rate to see just how much you could save with a mortgage refinance in 2021. 

Verify your refinance eligibility. Start here (Dec 4th, 2021)
Infographic outlining current and past mortgage relief refinance programs. Options include the Freddie Mac Enhanced Relief Refinance (FMERR), Fannie Mae High-LTV Refinance Option (HIRO), and Streamline Refinances for FHA, VA, and USDA loans.

Mortgage stimulus programs FAQ

Is there really a mortgage refinance relief program?

Two mortgage relief programs — HIRO and FMERR — have been put on hold because homeowners currently have so much equity that there’s little need for relief refinancing. However, if you do need mortgage assistance, you still have options. Some Congress mortgage stimulus programs enacted during Covid, such as forbearance, are still available. And homeowners with FHA, VA, or USDA loans can often refinance a high-LTV loan using Streamline Refi programs backed by the federal government.

Is there a government mortgage relief program?

The CARES Act and subsequent American Rescue Plan have provided mortgage relief during the Covid-19 pandemic. These programs do not refinance your mortgage but let you postpone repayment while keeping your loan active. The CARES Act also created a temporary moratorium on foreclosures and renter evictions.

Does Biden have a mortgage stimulus program?

Biden has proposed several stimulus programs to help with homeownership costs. In terms of mortgage relief, he recently enacted a measure to provide mortgage assistance to homeowners with federally backed FHA, VA, and USDA loans. Under this program, qualified borrowers can modify their mortgages to get a lower interest rate and potentially reduce their loan payments by up to 25 percent. Contact your mortgage servicer to learn whether you’re eligible for a loan modification.

Is the Freddie Mac Enhanced Relief program legit? 

The Freddie Mac Enhanced Relief Refinance (FMERR) is currently on pause due to a low volume of applicants. FMERR was meant to help homeowners refinance with very little home equity. But, due to rising home values, many U.S. homeowners have enough equity to refinance without needing a special, high-LTV program.

Is the HARP program still available?

No, the HARP program is no longer available. HARP, the Home Affordable Refinance Program, expired in 2018. You can no longer apply or be accepted for this mortgage relief program.

Can the VA help with mortgage payments?

Yes, the VA can help veterans and service members who are struggling to make their mortgage payments. The association provides housing counselors who will help you figure out the right course of action and work with your mortgage servicer to set your payment plan back on track. The VA can help with mortgage payment issues even if your current mortgage is not backed by the Department of Veterans Affairs.

Verify your new rate (Dec 4th, 2021)