Saturday, November 12, 2011 / by Nathan Clark
The Federal Housing Finance Agency on Monday announced that it will do away with a current restriction that limits eligibility to those whose mortgage doesn’t exceed more than 125 percent of a home’s value. For example, under current HARP guidelines, someone who owes $125,000 on a house worth $100,000 is eligible to refinance, but someone who owes more than $125,000 is not.
"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," said the FHFA acting director, Edward DeMarco, in a news release.
To be eligible, borrowers still must be current on the loan and be able to qualify for a new loan. The new guidelines come as the Obama administration attempts to help the housing market. One estimate is that the change will help about 600,000 homeowners who are currently not able to refinance using HARP. The Obama administration, though, said the number of newly eligible homeowners could be about 1 million.
The revamped program is also extended another 18 months and various fees and appraisal requirements have been done away with. Also, the changes bring with them a decreased liability for banks, not requiring them to repurchase defaulted loans, which could spur more competition among lenders for refinance business.