Two and a half years after it rolled out the Home Affordable Refinance Program, the Administration today announced several fundamental changes to make more troubled homeowners eligible.
The most import will allow owners who owe more on their mortgages than their homes are worth to refinance and take advantage of today's low mortgage rates. Other charges will reduce fees borrowers pay if they agree to shorter term mortgages and using computerized valuation tools rather than human appraisers where possible.
Treasury sources estimated as many as a million homeowners may participate in the program. The HARP program to date has served 894,000 borrowers, of whom just 70,000 were significantly underwater.
"We know that there are many homeowners who are eligible to refinance under HARP and those are the borrowers we want to reach," said FHFA Acting Director Edward J. DeMarco. "Building on the industry's experience with HARP over the last two years, we have identified several changes that will make the program accessible to more borrowers with mortgages owned or guaranteed by the Enterprises (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."
The new program enhancements address several key aspects of HARP including
• Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers;
• Removing the current 125 percent LTV ceiling for fixed-rate mortgages backed by Fannie Mae and Freddie Mac;
• Waiving certain representations and warranties that lenders commit to in making loans owned or guaranteed by Fannie Mae and Freddie Mac;
• Eliminating the need for a new property appraisal where there is a reliable AVM
(automated valuation model) estimate provided by the Enterprises; and
• Extending the end date for HARP until Dec. 31, 2013 for loans originally sold to the Fannie and Freddie on or before May 31, 2009.An important element of these changes is the encouragement, through elimination of certain risk-based fees, for borrowers to utilize HARP to refinance into shorter-term mortgages.
Borrowers who owe more on their house than the house is worth will be able to reduce the balance owed much faster if they take advantage of today's low interest rates by shortening the term of their mortgage.
Operational details will be provided to lenders and servicers by November 15. Since industry participation in HARP is not mandatory, implementation schedules will vary as individual lenders, mortgage insurers and other market participants modify their processes.