Today the Federal Housing Finance Agency, which oversees mortgage finance sources Fannie Mae and Freddie Mac, announced it was easing the terms of the Home Affordable Refinance Program. The two year old program helps borrowers who have been making mortgage payments on time, but have not been able to refinance because their home value has dropped. The announcement could help relieve up to one million homeowners of the estimated eleven million whose homes are worth less than their mortgage.
The Federal Housing Finance Agency said it will get rid of the cap that prohibits any homeowners whose mortgage exceeds 125 percent of the property’s value from participating in HARP. Edward DeMarco, FHFA’s acting director said, “Our goal in pursuing these changes is to create refinancing opportunities for these borrowers, while reducing the risk for Fannie Mae and Freddie Mac and bringing a measure of stability to housing markets.” Thousands of San Diego homeowners struggling are to make their mortgage payments each month, the hope is that many of them will participate in the HARP program.
The crippled housing market has played a key factor in the stagnant economy and has been an important topic of conversation in Washington. Earlier federal programs to help housing foreclosures have failed to yield the benefits initially promised. To encourage banks to participate in the program, FHFA is reassessing 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 terms eliminate appraisals in most cases. The new terms also encourage borrowers to shorten the term of the loan and repay faster; In turn the banks will waive certain fees. The program is expected to be extended until December of 2013.