The regulator of the two mortgage-financing giants, Fannie Mae and Freddie Mac, said today it has expanded its refinancing assistance to “underwater” homeowners by removing the current 125 percent loan-to-value (LTV) ceiling for fixed-rate mortgages.
With the much-anticipated adjustment, there is now no cap on how much a mortgage holder owes.
Enhancements to the two-year-old Home Affordable Refinance Program, known as HARP, targets homeowners whose mortgages – backed by Fannie and Freddie – exceed the value of their homes. It is the latest attempt by the Obama Administration to give a jolt to the ailing housing market and ease the ongoing foreclosure crisis.
But only homeowners current on their mortgage payments are eligible, a requirement which fails to assist those already in the foreclosure process.
Fannie and Freddie’s regulator, the Federal Housing Finance Agency, estimates that up to a million homeowners will take advantage of HARP, which has failed to meet previous expectations. Most U.S. home mortgages are funded by Fannie and Freddie, the government-sponsored enterprises under U.S. control since the financial crisis of 2008.
Another change to the program is the elimination of certain risk-based fees for borrowers to utilize HARP for refinancing into shorter-term mortgages. Borrowers will be able to reduce the balance owed much faster if they take advantage of historically low interest rates by shortening the term of their mortgage, the FHFA said.
“We have identified several changes that will make the program accessible to more borrowers with mortgages owned or guaranteed by the Enterprises,” said FHFA Acting Director Edward J. 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.”
Other enhancements to HARP include:
- Waiving certain representations and warranties to which lenders commit 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 Fannie and Freddie; 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.
See the FHFA’s Resource for Homebuyers and Homeowners.