NEW YORK -- In the government's latest attempt to address the ailing housing market, it announced changes to a federal program that will make it easier for struggling homeowners to refinance to today's near-record low rates.
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Under the new program, homeowners who owe more on their homes than they are worth will be able to refinance no matter how much they are underwater, as long as they are current on their payments.
Bill Watson, President of Jacksonville's Watson Mortgage, Corp. calls the change a step in the right direction.
"I think it is the right approach. It is nice to see them addressing people who want to do the right thing," said Watson.
The revamped Home Affordable Refinance Program (HARP) will also streamline the refinancing process, doing away with certain types of appraisals and underwriting requirements, and reducing or eliminating fees that prevented homeowners from refinancing in the past.
"It will work if the banks participate," said Carrie Davis. Davis is a HUD certified counselor who assist homeowners in trouble with their mortgages.
Davis said homeowners with mortgages that are bigger than the value of their home should seek help from their lender or contact the Fannie Mae help center.
More than 890,000 homeowners have already refinanced under the HARP program, which is available to borrowers with loans backed by Fannie Mae and Freddie Mac that were originated before May 31, 2009. But hundreds of thousands more could not qualify -- mainly because of the previous 125% loan-to-value limit on the program or because banks would not take on the risk.
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"We know there are many homeowners who are eligible to refinance under HARP and those are the borrowers we want to reach," said Edward DeMarco, acting director for the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac.
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Currently, about 11 million borrowers are underwater on their mortgages, with about 4.7 million of those loans meeting or exceeding the 125% loan-to-value limit, according to CoreLogic, a financial analytics company.
By the time HARP expires in 2013, FHFA estimates that up to one million more borrowers may benefit from the new regulations.
Many of those borrowers will be from states like Florida, California, Nevada and Arizona where home values have been hit the hardest. In metro areas like Las Vegas, for example, prices have plunged nearly 60% from their early-2006 peak.
The new rules and other details have yet to be finalized, but FHFA said that should all be worked out by Nov. 15. Banks may be able to start issuing refinanced loans by December 1.
Lifting the loan-to-value restrictions may still only help a limited number of borrowers, according to Jaret Seiberg, an analyst for MF Global Inc.'s Washington Research Group, which analyzes public policy for institutional investors.
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