HARP Expansion to Reach More Buyers

At a campaign stop in Nevada last week, President Obama announced an expansion of the HARP (Home Affordable Refinance Program), eliminating the current maximum Loan-To-Value (LTV) ration of 125%.  RIS Media reports:

The Federal Housing Finance Agency, with Fannie Mae and Freddie Mac (the Enterprises), has announced a series of changes to the Home Affordable Refinance Program (HARP) in an effort to attract more eligible borrowers who can benefit from refinancing their home mortgage. The program enhancements were developed at FHFA’s direction with input from lenders, mortgage insurers and other industry participants.

FHFA Acting Director Edward J. DeMarco stated:

“We know that there are many homeowners who are eligible to refinance under HARP and those are the borrowers we want to reach…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. 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.”

Of the 9 million families that Fannie Mae and Freddie Mac have helped refinance into a lower cost or more sustainable mortgage product, about 10% of those via HARP.

“HARP is unique in that it is the only refinance program that enables borrowers who owe more than their home is worth to take advantage of low interest rates and other refinancing benefits. This program will continue to be available to borrowers with loans sold to the Enterprises on or before May 31, 2009 with current loan-t0-value (LTV) ratios above 80 percent.”

Since program specifics won’t be released until next month, the KCM Blog offered these highlights:

  • It will only pertain to loans currently being serviced by Fannie Mae or Freddie Mac
  • Because of the removal of the LTV cap, appraisals may not be required
  • With the only qualifying criteria announced being that the last six payments be on time, it is possible that income documentation may be streamlined and credit scores might be more forgiving
  • Fees allegedly will be reduced
  • Incentives may be offered to people who shorten their repayment time
  • It also sounds that the banks may be given some incentive by not holding them liable for the underwater portion of the new loan (a major incentive for sure).

By eliminating certain risk-based fees, borrowers will be encouraged 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.

President Obama’s executive move has been praised by many as “the right action at the right time,” as bit of financial relief to many struggling homeowners throughout the nation.

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