The Obama administration has given another year of life to an foreclosure prevention program allowing certain borrowers to refinance underwater mortgages owned or guaranteed by Freddie Mac and Fannie Mae.
The Home Affordable Refinance Program had been set to expire June 30. HARP, as it’s known, will now continue through June 2012.
With 30-year fixed-rate mortages below 5%, the level they have inhabited much of the past two years, that may provide an attractive option for some homeowners.
One catch is that they can’t be too underwater — their Fannie Mae or Freddie Mac mortgages can be no larger than 125% of the value of their homes. They also must be current on their loan payments.
When HARP was announced in March 2009, the intent was to provide up to 5 million replacement loans to homeowners on more favorable terms.
That proved unattainable, as did the goal of the sister plan known as Home Affordable Modification Program. HAMP, as it’s called, initially aimed at modifying the terms of existing loans to help up to 4 million homeowners avert foreclosure.
While far off the ambitious early marks, Fannie Mae and Freddie Mac had provided 621,803 refinance loans under HARP as of Dec. 31, 2010, compared to 579,650 permanent modifications provided by HAMP.
The HARP program initially was designed to handle loans amounting to 80% to 105% of the value of the home. But as property values plunged, putting millions of homeowners further underwater on their mortgages, the loan-to-value ratio was increased to 125%.
In addition to extending the program for a year, Freddie Mac will exempt HARP loans from certain recently announced increased fees, according to Fannie Mae and Freddie Mac‘s overseer, the Federal Housing Finance Agency.
The FHFA also said that Fannie Mae is changing its previous eligibility cutoff of Jan. 1, 2009, to May 31, 2009, meaning another five months of loans may be considered for a HARP refinance.