WASHINGTON (7/2/09)--Homeowners whose mortgages are backed by Fannie Mae or Freddie Mac will now be given greater opportunities to refinance their homes under the Home Affordable Refinance Program (HARP). The Federal Housing Finance Agency (FHFA) Wednesday authorized those government-sponsored entities to increase their loan-to-value ratio ceiling to 125% from the current 105%. In a press release, FHFA Director James Lockhart said that the higher loan-to-value ceiling will “allow more homeowners to strengthen their finances by taking advantage of lower mortgage rates.” Fannie Mae and Freddie Mac may also allow eligible homeowners to “get ‘above water’ on their mortgages more quickly” by combining their reduced mortgage rate with a quicker amortization schedule. Such a program “could assist many homeowners who otherwise would have difficulty refinancing due to declining house prices,” Lockhart added. This change in terms could ultimately result in lower monthly mortgage payments for those who refinance under the plan, according to the FHFA release. Borrowers also mays shorten the length of their mortgage, allowing them to reduce long-term interest payments by paying down their principal. For a copy of the full FHFA release, use the resource link.