In the latest attempt to address the ailing housing market, the government on Monday announced changes to a federal program that will make it easier for struggling homeowners to refinance to today’s near-record low rates.
Under the new program, homeowners who owe more on their homes than they are worth will be able to refinance no matter how much they are underwater, as long as they are current on their payments.
More than 1 million homeowners could get cheaper mortgages as a result, officials estimated.
The revamped Home Affordable Refinance Program (HARP) will also streamline the refinancing process, doing away with certain types of appraisals and underwriting requirements, and reducing or eliminating fees that prevented homeowners from refinancing in the past.
More than 890,000 homeowners have already refinanced under HARP, which is available to borrowers with loans backed by Fannie Mae and Freddie Mac originated before May 31, 2009.
But hundreds of thousands more could not qualify — mainly because of the previous 125% loan-to-value limit on the program or because banks would not take on the risk.
Currently, about 11 million borrowers are underwater on their mortgages, with about 4.7 million of those loans meeting or exceeding the 125% loan-to-value limit.
By the time HARP expires in 2013, the federal housing agency estimates, up to 1 million more borrowers may benefit from the new regulations.
The problem: Mortgage holders still must be current on their payments for the past six months — with no more than one missed payment in the past 12 months –and they also must be able to qualify for a new loan.
Under the newly-revamped program, Fannie and Freddie will also reduce the fees they have charged in the past in order to enable borrowers to better afford the new loans.
Among the fees that may be reduced or eliminated are those for loan level price adjustments. Going forward, borrowers may not be penalized for less-than-perfect credit scores, for example.
Fees will also be waived for some underwater borrowers who refinance into 20-year or other, shorter-term loans. By doing so, it could help homeowners get above water faster.
We urge all of our clients to go to https://www.efanniemae.com/sf/mha/mharefi/pdf/refinancefaqs.pdf to see if you qualify for participation in these changes.
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