Modifications to the Home Affordable Refinance Program

Earlier this month, the Federal Housing Finance Agency announced an amendment to its Home Affordable Refinance Program, expanding refinance eligibility to help those homeowners who are at risk of being “underwater.”

The Obama Administration’s Home Affordable Refinance Program loan-to-value requirement has been raised to 125%. Previously, the program, announced in February, only applied to borrowers whose first mortgage did not exceed 105% of the current market value of the property.

The rationale behind the change to the program is that with the drastic decrease in property values in many areas, an additional 5% over the value of a mortgage wasn’t enough to help many borrowers. However, the program applies only to those borrowers who haven’t missed loan payments in the past year, and borrowers must hold a loan that was purchased by Freddie Mac or Fannie Mae. For those who are unable to make their payments at all, there are different programs that apply, which we will cover in a later blog post.

As discussed in Present Value’s previous blog post, “Decrease in Home Values Correlates to Increase of Homeowners Who Are ‘Underwater,’” a report released by Zillow.com in May, estimated that 22% of homeowners had mortgage balances that were greater than the value of their homes and that an additional 2.2 million borrowers were at risk of falling into this position if housing values declined an additional 5%.

The additions to the program will be beneficial for homeowners whose only other options would be to hope for the best in terms of home valuations or would be at risk for foreclosure. For more information on finding out the most accurate value of your home, click here.

By: Present Value

Tags: Fannie Mae, Federal Housing Finance Agency, Freddie Mac, Home Affordable Refinance Program, present value, Underwater
Posted in Fannie Mae, Freddie Mac, Real Estate | 10 Comments »