The Federal Housing Finance Agency has removed several barriers in the Home Affordable Refinance Program that will give more underwater homeowners more refinancing options.
HARP was launched in March 2009 to help borrowers with mortgages backed by Fannie Mae and Freddie Mac refinance homes with negative equity. Since its launch, the program has helped more than 800,000 underwater homeowners. The program was established to help borrowers with a loan-to-value ratio between 80 percent and 125 percent, but as of September 2011, only 7 of homeowners who were granted a refinance have a loan-to-value ratio above 105 percent.
It's currently estimated that there are more than 11 million borrowers who owe more on their mortgage than their home is worth, and in order to assist them, the FHFA is removing the 125 percent loan-to-value ceiling on the program. The FHFA also elected to remove certain risk-based fees required for borrowers and is waiving certain representations and warranty for lenders of refinanced mortgages. In an attempt to speed up the refinancing process, an individual appraisal will no longer be required if there is already an automated valuation model estimate proved by Fannie and Freddie. The program's time frame was already extended earlier this year, but the FHFA has committed to pushing the program until the end of 2013.
"We know that there are many homeowners who are eligible to refinance under HARP and those are the borrowers we want to reach," said acting director of the FHFA, Edward DeMarco. "Our goal in pursuing these changes is to create refinancing opportunities for these borrowers, while reducing risk for Fannie Mae and Freddie Mac and bringing a measure of stability to housing markets."
Analysts believe that the changes will allow lenders to refinance loans without fear the Fannie and Freddie will force them to repurchase the loans should the borrower default. The FHFA predicts that the number of refinances will be doubled by the end of 2013.
A statement from the National Association of Home Builders sees the changes as encouraging, but still recognizes the extensive work that is still to be done.
"Making more borrowers eligible for refinancing their mortgages by enhancing the Home Affordable Refinance Program will give a badly needed boost to consumer confidence," said Bob Nielsen, chairman of the National Association of Home Builders.
However, Nielsen also focused on how many families who have fallen far behind on payments due to a weak job market and subsequently will not be able to benefit from the changes. He called for additional policies to prevent even more foreclosures and deal with the backlog inventory of foreclosed homes.
Other critics of the new regulations said that lifting the loan-to-value restriction will not be able to reach the number of anticipated borrowers since borrowers will still need to be current and qualify for a new loan.
"This change is unlikely significantly to expand the universe of eligible HARP borrowers as the borrowers must still be current and qualify for a new loan," said Jaret Seiberg, an analyst for MF Global, in a research report.
HARP is only open to borrowers who are current on their payments in the past six months and the loans must have originated before May 31, 2009 to qualify. Despite criticism, the changes mark another step on the road to economic recovery and reinforce Freddie and Fannie's vital role in making finance options available to American homeowners and future homebuyers.
Most of the homeowners owe more than their house worth with no fault of their own. Refinancing these undetwater loans should be a state law. By lowering the principal and the interest rates, the economy will change tremendously. It is time for the bank nowhere to stop thinking about their own pockets. How much richer do the have to they have to be? What happen to the the americain dreams?
I Agree with Jean…I believe that all homeowners should have to free ability to have a modification done , to lower monthly payments and overall cost of these overly high out of touch price of their homes. Since we bailed out thses banks and morgtage companies with over 200 billion dollars, WE the Taxpayers actually own 74 percent of these same banks and mortgage lenders, so…to those who want all homeowners for what ever reason to be able to refinace/modifiy morg. to a rate and payment that is affordable to them please respond…Thank you and lets keep the American Middle class working and being productive. PS: I hope that all Americans will see that it took 0ver 20 yrs to get where we are do to Regean / Bush sr…who deregulated the banks., and Then Clinton comes in and gets our deficiet down to nothing and creates jobs., then another rep.GOP Bush jr was elected..and completely outsourced our jobs..gave companies tax breaks for doing so., and allowed the false mortgage scam to continue with eyes wide open., we bailed them out…THEY OWE US…Please keep the democrates in office for another term., give the middle class what we deserve..The GOP is still holding out and not willing to give a dime to help out on their false corruptive ways, they are still seeking all monies from the middle class…are you going to allow them to keep squeezing you until you are blood done…???because if the GOP is in office..as President., consider the middle class gone for good…it took 26 yrs to get here, its gonna take alittle more time to get back to where we need to be…Keep the Democrates in Power..Please, God Please and help the homeowners keep their homes…oppose to those who we baliled out steal them back again..and again…until we all are homeless..while they have a GOP