FHFA Extends High LTV Refinance Program into 2011

Homeownersrnwho hope to refinance existing mortgages that are “underwater” justrngot a reprieve that will allow them another year to do so.  The Federal Home Financing Agency announcedMonday that its Home Affordable Refinance Program (HARP), which was originallyrnset to expire on June 30, 2010, will be extended to June 30, 2011.

HARP,rnpart of the Making Home Affordable Program, is designed to expand accessrnto refinancing for otherwise qualified borrowers who cannot move into morernaffordable mortgages because of a lack of equity in their homes.  Unlike other homeownership assistancernprograms, HARP guidelines are designed for borrowers who are current on theirrnmortgages.  The program was originallyrndesigned to help homeowners with a loan-to-value (LTV) ratio up to 105 percentrnincluding those with some equity but not enough to refinance without privaternmortgage insurance.  Last October thatrnLTV figure was revised upward to 125 percent.

ActingrnFHFA Director Ed DeMarco said that “FHFA has reviewed the current marketrnsituation and the state of mortgage insurance availability and has determinedrnthat the market conditions that necessitated the actions taken last year havernnot materially changed.  Accordingly, tornsupport and promote market stability, and to encourage lenders and otherrnmortgage market participants to fully adopt the HARP program…FHFA isrnauthorizing the extension of HARP until June 30, 2011.”

The extensionrnof the HARP comes less than a week after President Obama announced hisrnadministration would infuse $1.5 billion in stimulus funds into state housing financernagencies in states that have suffered a dramatic drop in housing prices coupledrnwith higher than average unemployment. rnThe funds, under the moniker 4HM for Help for thernHardest-Hit Housing Markets, will be used to help unemployed homeowners avoidrnforeclosure and for refinancing homes where the homeowner no longer has equity.rnA major concern during the housing downturn has been the potential of massivernnumbers of homeowners walking away from homes in which they no longer have arnfinancial interest.

In 2009,rnFannie Mae and Freddie Mac purchased or guaranteed more than 4 millionrnrefinanced mortgages.  Of these, 190,180rnwere HARP refinances with LTVs between 80 percent and 125 percent.

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