The Federal Housing Refinance Authority (FHFA), which regulates Fannie Mae and Freddie Mac, announced that changes are being made to the Home Affordable Refinancing Program (HARP) so that the program can help more homeowners. HARP is an important program because it is the only program that allows homeowners who are underwater to refinance their loans. The program is available to owners whose loans were purchased by Fannie Mae or Freddie Mac before June 1, 2009 and whose current loan-to-value ratios are greater than 80 percent. This program is available until December 13, 2013.
The changes include:
- Removing some of the risk-based fees for owners who refinance with a shorter term and lowering those fees for other owners
- Eliminating the existing 125 percent loan-to-value maximum for fixed-rate mortgages
- Ending some of the representations and warranties previously required from lenders
- Not requiring a new property appraisal if Fannie Mae or Freddie Mac can provide a reliable estimate
It is a relief to see the government becoming more realistic about how many homeowners need the opportunity to refinance. Allowing homeowners to refinance loans that have become burdensome will help to stabilize the housing market by preventing more foreclosures, whether they are unavoidable foreclosures or strategic defaults. Fannie Mae and Freddie Mac and 12 Federal Home Loan Banks provide over $5.7 trillion in funding for the U.S. mortgage market and financial institutions.
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