Fannie Mae and Freddie Mac are extending one of the most successful federal programs enacted in response to the mortgage crisis into next year, even as the pool of borrowers who could benefit from it continues to shrink.

Borrowers can continue to use the Home Affordable Refinance Program, or HARP, though September next year, the Federal Housing Finance Agency, which regulates the mortgage-finance companies, said Thursday. HARP allows some borrowers to refinance to a lower rate even if the equity they have in their home is less than 20 percent, the typical cutoff for some refinances.

The FHFA on Thursday also gave some details on what will replace HARP once it permanently expires. The new refinance program will only benefit people who have less than 3 percent equity in their homes at Fannie Mae, for example, and less than 5 percent at Freddie Mac, for typical single-family borrowers. They also will have to be current on their mortgages, as they are required to be under HARP.

New Cutoff

The new equity cutoff is likely to limit the pool of eligible borrowers to those who owe more on their mortgage than their homes are worth, or close to it. Unlike HARP, where borrowers must have had a loan originated before June 2009, the new programs won’t have an eligibility cutoff.

The FHFA last week said that as of the first quarter there were about 323,000 borrowers still eligible for HARP who could benefit from refinancing to a lower rate. Since the inception of the program through the second quarter, more than 3.4 million borrowers have refinanced through HARP.

Still, as home prices have risen, and low mortgage rates have continued to drive refinances, officials at FHFA and Fannie Mae and Freddie Mac have struggled to reach the remaining group of borrowers who could still refinance. The agency in the second quarter said borrowers completed 18,310 refinances through HARP, the slowest rate since 2009.

The companies and government officials have held outreach events in cities such as Atlanta and Miami to try to spur more people to use the program. FHFA in May 2015 said it would extend HARP through the end of this year, and at the time FHFA Director Melvin Watt said he expected that to be the final extension.

In a release, the FHFA said more details would be released about the replacement program in the next several months.

Key Updates:

  • HARP program will continue through September 2017, FHFA says
  • Companies will launch a new refinance program in October 2017

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