New Government Mortgage Refinancing Program

The nation’s housing market is having its road to recovery paved with a new mortgage refinancing program, which was unveiled Monday October 24th 2011. Building upon the successes of the Home Affordable Refinance Program (HARP), the government has introduced some changes to the rules that will allow more homeowners who find themselves sinking further into debt to reduce their debt by taking advantage of much lower interest rates. Qualifications for this new program require the mortgage to be backed by Fannie Mae or Freddie Mac, and must have been originally sold to the Government Sponsored Enterprises (GSEs) prior to May 31st 2009.

The previous guidelines limited the qualifying homeowners to those who owed up to 25% more than their home was actually worth. Under the new revisions, this 125% loan-to-value (LTV) limitation cap has been removed.

There have been other program enhancements designed to address issues that have proven to restrict the program’s impact. Certain risk-based fees have been eliminated, and mortgage insurers can now automatically transfer the original loan’s coverage to the new loan. As well, Freddie Mac and Fannie Mae have eliminated the need for a new property appraisal where there is already an Automated Valuation Model (AVM) estimate provided, and certain warranties and representations on any program refinanced loan have been done away with. The final date for HARP has been extended from June 30th 2012 to December 31st 2013.

The risk of homeowners foreclosing due to strategic defaults will be lowered with the new guidelines. By opening HARP to a larger pool of indebted homeowners, borrowers will be able to get control of their household finances and will be less likely to walk away from a mortgage with negative equity. About 1 million homeowners have already taken part in the program and refinanced their mortgages, and it is estimated that another 1 million homeowners will step forward to take advantage of the program.

You can learn more about the Home Affordable Refinance Program (HARP) here.