HIRO Mortgage Program: High LTV Refinance Option

*This program is not currently available. This article is for informational purposes only. 

When mortgage rates are low, refinancing to change loan terms, lower interest rates or both is an attractive prospect for homeowners who want to lower their monthly mortgage payments. However, traditional refinance options require a minimum amount of home equity to qualify.

For homeowners with Fannie Mae-backed loans and low equity in their homes, the High LTV Refinance Option mortgage program (HIRO) from Fannie Mae allowed them to refinance their mortgages.

We’ll go over what the program was, how it worked, who qualified and currently available options you can take advantage of to refinance your home loan.

HIRO stands for High LTV Refinance Option. It was a mortgage relief program administered by Fannie Mae. The program was a lifeline for homeowners who were making on-time monthly mortgage payments, but their high loan-to-value ratio (LTV) – the remaining balance on your loan compared to the value of your home – disqualified them from refinancing their home loan.

Traditionally, borrowers must have a minimum amount of equity in their homes – typically between 5% and 20% – to qualify for standard refinance options. HIRO (and another program we’ll discuss later from Freddie Mac) were the spiritual successors to the Home Affordable Refinance Program (HARP). HARP helped homeowners refinance their mortgages despite having little to no equity in their homes.

Although some requirements were slightly different, HIRO and HARP helped homeowners refinance to a lower interest rate or change their loan terms. Because the programs helped homeowners with little to no equity in their homes, the one borrower benefit that wasn’t available to them was taking cash out. Getting cash from a refinance requires having enough equity to convert to dollars.

Although there were various programs aimed at accomplishing the same goal, HIRO worked for homeowners with Fannie Mae-backed loans who hadn’t previously refinanced through HARP.

There were several requirements borrowers had to meet before they could refinance their mortgage through HIRO.

Income Verification

Like similar programs, refinancing with HIRO provided borrowers with a new mortgage. To have the lender pay off the original mortgage and the borrower start paying off a new mortgage, borrowers had to go through an application process. Depending on the borrower's financial situation, they may not have verified their income. The program was also more flexible about reviewing borrower assets, employment verification and home appraisals.

Rates

The interest rate you get on your mortgage is determined by a combination of things, including market factors, your finances and your credit history. Because HIRO worked with borrowers with little to no equity in their homes, lenders believed HIRO loans posed a higher risk of default, and they offered slightly higher interest rates than the rates they offered for other refinancing options.

Because some qualifying factors for HIRO and similar programs helped reduce lender risk, the interest rates offered were competitive with prevailing market interest rates.

To qualify for the HIRO mortgage program, you needed to meet several qualifying factors:

• A mortgage eligible for refinancing had to have a note date on or after October 1, 2017.

• The existing mortgage must’ve been at least 15 months old before you closed on your HIRO refinance.

• You needed to be current on your existing mortgage, which meant no payments that were 30 days late in the last 6 months and only one 30-day late payment in the last year.

• As with any conventional loan, you needed a median FICO^® Score of 620 or higher.

There were no specific requirements for the mortgage length of the existing loan or the refinance loan under the HIRO mortgage program.

In addition to the above requirements, there are other key qualification factors.

Fannie Mae Backed

One of the key requirements was that your original mortgage had to be backed by Fannie Mae. Because Fannie Mae (and the administrators of similar programs) was taking on increased risks with high LTV loans, they wanted to limit their exposure by only refinancing the loans they originally approved.

You can use Fannie Mae’s loan lookup tool and check if your loan is backed by it. If your conventional loan isn’t backed by Fannie Mae, it may be backed by Freddie Mac.

If that’s the case and you wanted to refinance but had low equity in your home, you could try taking advantage of the Freddie Mac Enhanced Relief Refinance Mortgage (FMERR).

You may not have a conventional loan at all. Maybe you have a home loan backed by the federal government. If you want to refinance and have an FHA loan, take a look at FHA Streamlines. If you have a VA loan, you should look at the VA Interest Rate Reduction Refinance Loan (IRRRL), also known as a VA Streamline.

Minimum And Maximum LTVs

Most mortgage loan options have a maximum LTV cap you must stay under to qualify. Because HIRO helped homeowners with little to no equity, there were no maximum LTV ratios. Instead, there are minimum LTV ratios.

Minimum LTV By Property Type And Number Of Units

Here is a breakdown of the LTV ratios:

If your LTV was too low to meet the requirements and qualify, the good news was that you potentially qualified for traditional refinancing options.

Tangible Net Benefit

HIRO, and programs like it, required borrowers to gain a “tangible net benefit” from refinancing. In other words, borrowers had to benefit from refinancing their mortgages. All of the following were considered tangible net benefits:

• Lower principal and interest payment
• Lower interest rate
• Shorter loan term
• More stable mortgage loan (such as switching from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage)

The HIRO mortgage program allowed homeowners with mortgages backed by Fannie Mae to refinance their home loan and lower their interest rate or change the length of their loan – even if they were underwater on their mortgage, which is when you owe more than your home is worth. Now expired, HIRO once served along with the Freddie Mac Enhanced Relief Refinance Mortgage program as a replacement for HARP.

HARP offered competitive interest rates and more lenient verification of employment, income, assets and property value. There was no maximum LTV requirement to meet. And your mortgage had to have been backed by Fannie Mae to qualify.

The HIRO mortgage program isn’t currently available, but homeowners have many existing options to refinance their mortgages. If you need to lower your interest rate or change your loan terms, apply to refinance today!