GRAND RAPIDS, Mich. — WHAT WAS THIS PROGRAM?
- A Freddie Mac Enhanced Relief RefinanceSM (FMERR) mortgage offered relief for borrowers with existing Freddie Mac mortgages.
- It may have allowed refinancing opportunities to borrowers who might not have qualified because they exceed maximum loan-to-value (LTV) limits.
- It was an enhancement of Freddie Mac’s implementation of the Home Affordable Refinance Program® (HARP®) that expired at the end of 2018.
WHY SHOULD I CARE ABOUT A PROGRAM THAT RECENTLY EXPIRED?
- History tends to repeat itself.
Should you believe advertisements that catch your attention by suggesting you could save $3,000 per year?
Will you be ready when you see claims and promises for the next program that arises?
- Although this specific program expired on September 30, 2019, it is worth exploring its provisions so you may keep abreast of developments.
- Awareness of FMERR requirements can help you prepare for eligibility as future programs become available.
- You can also benefit from general knowledge about refinancing considerations and best practices.
HOW COULD A PROGRAM LIKE THIS HELP ME?
- Programs such as FMERR may provide options for you to refinance your primary mortgage when traditional circumstances prevent eligibility.
- A lower rate could reduce monthly payments.
- You may be able to reduce the term of your mortgage.
- Perhaps you might even move from an adjustable-rate to a fixed-rate loan.
WHAT WERE THE MOST SIGNIFICANT REQUIREMENTS?
- Must have been an existing Freddie Mac mortgage that originated on or after October 1, 2017.
- The existing mortgage must not have been a Relief Refinance Mortgage.
- At least 15 months must have elapsed between the date of the original mortgage and the date of the FMERR mortgage.
- LTV ratio for the new mortgage must not have exceeded the maximum for a standard no-cash-out Freddie Mac refinance.
- Borrowers must have been current with payments on their existing mortgage.
No 30-day delinquencies in the past six months.
No more than one 30-day delinquency in the past 12 months.
- Minimum LTV ratios existed.
Primary residence: 80.01% - 97.01% depending upon the number of residence units
Second home: 90.01%
Investment property: 85.01% for one-unit and 75.01% for two- to four-unit properties
- The new mortgage amount was limited.
Payoff of the existing principal balance.
Plus a maximum of $5,000 for closing costs.
Cash disbursed to the borrower was capped at $250.
WHAT STEPS SHOULD I TAKE?
- Ensure that you can actually afford the home that secures this mortgage!
- Beware of attention-grabbing advertisements that suggest you can save $3,000 per year!
- Actual savings will depend on your current interest rate and current loan balance in combination with today’s mortgage interest rates.
- Analyze the one-time closing costs in comparison with your expected reduction of interest expense to ensure that refinancing will produce an economic benefit.
- Contact your existing lender to discuss programs for which you may be eligible.
Christopher Harper, CPA, MBA
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