A mortgage-refinance program aimed at helping millions of Americans with declining home values is set to undergo a major overhaul.
The changes to refinancing rules are designed to aid homeowners.
The revamp will allow borrowers to refinance no matter how far their homes have fallen in value, removing previous limits. The refinance process will be facilitated as appraisals and many underwriting requirements will be eliminated. A couple of years ago the Home Affordable Refinance Program (HARP) was unveiled, which opens up a refinancing opportunity to borrowers with less than 20% in equity so long as their loans are backed by Fannie and Freddie. The program hasn’t delivered as hoped, with only a small portion of borrowers (under 900,000) actually using it, and even less (about 70,000) being significantly underwater – or owing more than their home’s value. It’s hoped that the revamp will make refinancing available to up to a million more borrowers.
The changes that federal officials are preparing will allow bans to avoid having to buy-back a loan (which Fannie and Freddie can require in the event of an underwriting flaw) on HARP mortgage as long as borrowers are current on mortgage payments for the last 6 months and can show they have some steady source of income.
The pricing details won’t be available until the middle of November, and lenders may start refinancing under the refurbished programs as early as the 1st of December. The current loan limit is 125% of the property’s value; any loans that exceed this limit will not qualify to participate until next year. The program will not expire mid-2012 as initially planned, but will be extended through 2013. HARP is only open to loans which have been guaranteed by Fannie and Freddie as of June 2009.
See also:
Alt-A Securities Sought by Investors
Things to do Before You Refinance
Now May Not be the Best Time to Refinance
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