What is Hiro Mortgage Program?

Basics of the HIRO Program

The HIRO program, administered by Fannie Mae, is a loan program designed to help get homeowners a lower rate and payment options even in circumstances where they may have little or no equity in their home yet. The HIRO program is very different from most other refinancing programs, as they usually require equity in order to refinance no matter how good your income or credit rating may be.

And while the appreciation of homes has generally occurred for most areas in the nation, this appreciation isn’t uniform, and other regions are experiencing stagnant home prices or even depreciation. The rise in equity potential is very uneven, and the latest data shows that in the fourth quarter of 2019, 3.5 million US homes – one in 16 - were seriously underwater with a mortgage loan balance that is at least 25% higher than their home’s value. These borrowers are the ones that the HIRO program could advantage the most.

While many mortgages will qualify for the Fannie Mage High LTV Refinance option, not all mortgages or property owners will be eligible. Initial qualifying criteria include:

• Holding a mortgage that is currently owned by Fannie Mae.
• The mortgage must have originated on or after October 1, 2017.
• There must be a 15-month interim between when your initial loan originated and when the refinanced loan is opened.
• The mortgage can have no 30-day late payments within the last six months, not more than one 30-day late payment in the previous 12 months, and no delinquency greater than 30 days.
• Reverification of income by one of the following methods:
  • Verbal verification of current employment or self-employment by at least one of the listed borrowers.
  • Documentation of non-employment income, such as pension or Social Security.
  • Documentation of liquid financial reserves equaling at least 12 months of the new full housing payment, including insurance, taxes, and any other associated expenses.

Aside from there criteria, there are few other requirements for qualification. Lenders generally aren’t required to consider credit scores, since the borrow has an excellent financial history in relation to the property that is being refinanced. This requirement may vary from lender to lender, though, as some may add additional requirements on top of what is required by Fannie Mae.

Additionally, there is no debt-to-income ratio ceiling. The rationale behind this is that the refinance will likely lower monthly costs for the borrower, meaning they will be in a better financial position no matter what their debt-to-income ratio currently is. However, if for some reason, the refinance were to increase your payment by more than 20% or you were removing a borrower from the loan, a new debt-to-income ratio would be necessary. The Alternative Qualification Path may be applicable in this instance, too, as it is generally necessary for situations where the lender has to requalify the loan because it is changing the loan significantly.

Bank statements are generally also not necessary unless your payment is increasing by more than 20%, or you are removing a borrower for the loan.

The requirement for a home appraisal is a little bit more complicated. Some loans will need new ones; others will not. The determination on whether a home appraisal is necessary is made when the borrower completes and submits a full application with the lender. Those loans that do not need a new appraisal will receive an appraisal waiver, which is ideal since it saves the borrower time and money.

However, if you do need a new appraisal, this is often not a barrier to securing a HIRO refinance since the program sets no maximum LTV, meaning that the appraised value can’t come in too low.