WASHINGTON (10/25/11)--The Federal Housing Finance Agency (FHFA), the federal regulator with oversight responsibility for Fannie Mae and Freddie Mac, announced changes Monday to the Home Affordable Refinance Program (HARP) to attract more underwater borrowers who could benefit from refinancing their home mortgages.
News reports, such as one from ABC News blog
, reported that President Obama announced the proposal from a Las Vegas home's front porch. Nevada has one the highest foreclosure rates in the country.
HARP was launched in 2009 to let troubled homeowners bypass a requirement that they have at least 20% equity in their home to be able to refinance their mortgages at lower rates. However, the program has been, some say, severely under utilized because many cannot qualify for help.
The program enhancements announced yesterday were developed at FHFA's direction with input from lenders, mortgage insurers and other industry participants. Program changes include:
- Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers;
- Removing the 125% loan-to-value ceiling for fixed-rate mortgages backed by Fannie and Freddie;
- Waiving certain representations and warranties made by lenders on loans owned or guaranteed by Fannie Mae and Freddie Mac;
- Eliminating the need for a new property appraisal where there is a reliable automated valuation model estimate provided; and
- Extending the end date for HARP until Dec. 31, 2013 for loans originally sold to Fannie and Freddie on or before May 31, 2009.
The FHFA, in a release, said one important element of the changes to HARP is the elimination of certain risk-based fees, which should encourage 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," explained the agency.
Fannie Mae and Freddie Mac plan to issue guidance with operational details about the HARP changes to mortgage lenders and servicers by Nov. 15.