Along with helping borrowers having little or no equity, the Fannie Mae High LTV Refinance Option (HIRO) also helps some underwater borrowers, who owe more on their homes than the property is worth.
Millions of homeowners face the problem of a lack of equity, another issue is low–equity borrowers are stuck with high–cost mortgages which cannot be refinanced at today’s rates.
With the HIRO program, homeowners will be able to benefit from a lower rate and more affordable mortgage payments.
If the original purchase price of a home for a borrower is $250,000 and if they have paid a 3% down payment of $7,500 and if the balance left on the loan is $238,000, if the current value of the home is $245,000 then the current loan–to–value 97.14% then in such a situation the loan–to–value ratio would be quite high for a traditional refinance and the borrower might be able to qualify for the HIRO high–LTV refinance.
Currently, because the rates are down, HIRO can lower the borrower’s monthly payment and free up needed cash in their budget.
With HIRO the borrower has a lower monthly cost and a better loan, resulting in a borrower with a good payment record and who represents less risk of delinquency or foreclosure.