Refinance Program for Underwater Borrowers Open Through Mid-2012 :: The Construction Management Pro

Refinance Program for Underwater Borrowers Open Through Mid-2012

By: Carrie Bay

The Federal Housing Finance Agency (FHFA) has pushed the cut-off date for the Home Affordable Refinance Program (HARP) out by a year.

HARP is one of several mortgage aid programs under the administration’s Making Home Affordable umbrella. It allows homeowners who owe more on their mortgage than the home is worth obtain a new loan at today’s lower interest rates with the goal of pulling borrowers “above water” to get out from under plummeting property values. The program, administered by Fannie Mae and Freddie Mac, was originally set to expire on June 30, 2011. FHFA has now extended the program through June 30, 2012. Under the program, borrowers with mortgages owned by Fannie Mae and Freddie Mac, who are current on their payments and whose loan-to-value (LTV) ratio is between 80 percent and 125 percent, can refinance into a lower-rate loan.

“The program expands access to refinancing for qualified individuals and families whose homes have lost value,” Edward DeMarco, FHFA acting director, explained in a statement. In addition to HARP’s extension, FHFA announced changes to each GSE’s program parameters to better align the joint initiative. Previously, qualifying loans for Fannie Mae had to have been made prior to March 2009, while for Freddie Mac it was prior to May 2009. Going forward, both companies will use the May 2009 cut-off date for program eligibility.

FHFA also said Freddie Mac will be required to exempt HARP loans from its recently announced pricing adjustments. Freddie announced last November that effective March 2011, it was increasing loan level fee pricing up to 50 basis points, depending on the borrower’s FICO score and LTV ratio. FHFA has instructed Freddie to exclude all HARP refinancing from the new fee structure.

DeMarco says HARP has grown substantially over the past year. Through 2010, Fannie Mae and Freddie Mac purchased or guaranteed more than 6.8 million refinanced mortgages. Of this total, 621,803 were HARP refinances with LTVs between 80 percent and 125 percent. This is up from 190,180 in 2009, when HARP began.

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