The Federal Housing Finance Agency, which oversees mortgage finance sources Fannie Mae and Freddie Mac, said it was easing the terms of the two-year-old Home Affordable Refinance Program, which helps borrowers who have been making mortgage payments on time but have not been able to refinance as home values have dropped.
To help underwater borrowers, or those whose loans are worth more than their homes, FHFA said it will scrap a cap that prohibits any homeowners whose mortgage exceeds 125 percent of the property’s value from participating in HARP, which is targeted at loans backed by Fannie Mae and Freddie Mac.
“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,” FHFA’s acting director, Edward DeMarco, said in a statement.
It remained unclear whether the Obama administration’s revised approach, which falls short of an overarching plan that some experts have said is needed, will provide enough of a boost to the battered housing market to spur the stagnant U.S. economic recovery.
Earlier federal programs to curb housing foreclosures have failed to yield the benefits initially promised.
To encourage banks to participate in the program, FHFA is revamping it to protect lenders from having to buy back HARP loans if underwriting problems are later found. Banks will only have to verify that borrowers have made at least six of their last mortgage payments and the new rules eliminate the need for appraisals in most cases.
FHFA said government-controlled Fannie Mae and Freddie Mac will waive certain fees for borrowers that refinance into loans with a shorter term, such as 15 years, aiming to spur homeowners to pay down the amount they owe at a faster rate.
HARP, one of the Obama administration’s anti-foreclosure efforts, was unveiled in March 2009 and was expected to help as many as 5 million borrowers. So far, however, only about 894,000 borrowers have refinanced their loans through the program.
FHFA said it will extend the effort until Dec. 31, 2013. The program is limited to loans that Fannie Mae and Freddie Mac guaranteed before June 2009.
After meeting with DeMarco earlier this month, one lawmaker said the expanded program could help as many as 600,000 to one million borrowers. But that is only a fraction of the estimated 11 million homeowners who are underwater.
Homeowners can determine if they have a Fannie Mae or Freddie Mac loan by going to:
According to ProPublica, only about 40% of the loan mods have stuck, and you have to wonder if these HARP refinances will do any better. Sure, they haven’t missed a payment in six months, but they’ll get another reminder of how underwater they are – which has been the leading cause of walkaways.
And as Rob Dawg said, won’t this also cause more people to wait to see what the new government cheese will be next year? They are already talking about it – link: http://www.calculatedriskblog.com/2011/10/ny-fed-president-dudley-more-action.html