Today, President Obama will unveil a revamping of the Home Affordable Refinance Program (HARP) with the goal of making it easier for homeowners who hold mortgages greater than the value of their homes to refinance.
HARP, which debuted in 2009, allowed homeowners who met certain restrictions to refinance their mortgages. The restrictions limited the program to borrowers who owed between 80 and 105 percent of the value of their home, and it required lenders to buy back the defaulted loan if their underwriting and appraisal processes were deemed faulty. Only homeowners who had loans backed by Fannie Mae and Freddie Mac prior to June 2009 are eligible.
According to The Wall Street Journal, fewer than 900,000 borrowers participated in the program, a number that fell below the administration’s estimates. Even after raising the limit to 125 percent in mid-2009, the program didn’t see much action.
With the revamp, the administration is eliminating the 125 percent limit (so, in essence, there is no limit to how much you owe on your home), and banks will be relieved of some of the risk that certain homeowners pose.
From The Wall Street Journal’s recent FAQ about the changes:
Banks will be largely shielded from the “buy back” risk on HARP mortgages, and they’ll only have to verify that borrowers meet a more tailored set of eligibility rules: that they’ve made their last six [mortgage] payments and have no more than one missed payment in the last year, and that they have a job or another source of regular income.
The HARP program has been extended through 2013 and the new aspects of the program are likely to go into effect by the end of the year. Officials at the Federal Housing Finance Agency estimate that between 800,000 and 1 million more borrowers should be able to take advantage of the program based on the changes.
This article originally published at http://dc.urbanturf.com/articles/blog/obama_revamps_refinance_plan/4421
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