The Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac loans with a loan-to-value ratio of up to 125 percent would be eligible for refinance under the Home Affordable Refinance Program. This increase, which was discussed by FHFA Director Shaun Donovan at the recent National Association of Real Estate Editors Conference, will allow more homeowners with falling home values to refinance their mortgages. To qualify for the Home Affordable Refinance Program, the homeowner must be current on their mortgage payment.
Read more about what Shaun Donovan had to say on fixing the housing market.
FHFA AUTHORIZES FANNIE MAE AND FREDDIE MAC TO EXPAND HOME AFFORDABLE REFINANCE PROGRAM TO 125 PERCENT LOAN-TO-VALUE
Washington, DC – The Federal Housing Finance Agency has authorized Fannie Mae and Freddie Mac to expand the Home Affordable Refinance Program (HARP) to homeowners who are current on their mortgage payments from the present loan-to-value ratio ceiling of 105 to 125 percent. With these expanded refinance opportunities, qualified borrowers whose mortgages are currently owned or guaranteed by Fannie Mae and Freddie Mac will be allowed to refinance those loans according to the terms of the Home Affordable Refinance Program established earlier this year.
“I am pleased to join Secretaries Donovan and Geithner in announcing this expansion of the Obama Administration’s Making Home Affordable program,” said FHFA Director James Lockhart. “The higher LTV refinancings will allow more homeowners to strengthen their finances by taking advantage of lower mortgage rates. The Enterprises are also incenting these borrowers to combine a lower mortgage rate with a faster amortization schedule, which will enable them to get ‘above water’ on their mortgages more quickly. This program could assist many homeowners who otherwise would have difficulty refinancing due to declining house prices,” Lockhart said.
The program provides borrowers with an incentive to reduce the term of their loan from 30 years to a shorter-term, fixed-rate mortgage and therefore pay down the principal more quickly and reduce lifetime interest payments. Borrowers who refinance may see lower monthly payments and a more sustainable mortgage which will reduce the risk of default. This expansion of HARP will assist the Enterprises in managing the credit risk associated with these higher loan-to-value mortgages.
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