The Federal Housing Finance Agency removed several key barriers to the Home Affordable Refinance Program Monday to allow more underwater borrowers to move into lower-rate mortgages. In order to assist more of the estimated 11 million borrowers who owe more on their mortgage than their home is worth, the FHFA removed the 125% LTV ceiling on the program.
The FHFA also eliminated certain risk-based fees borrowers had to pay and waived certain representation and warranty risk for lenders of the new, refinanced mortgage. An appraisal would also no longer be required if an automated valuation model estimate was already provided by the government-sponsored enterprise.
The borrower must be current on the mortgage at the time of the refinance, with no late payment in the past six months and no more than one late payment in the past 12 months. Mortgage insurers agreed to automatically transfer coverage from the old loan to the new loan, and servicers agreed to resubordinate second liens into the new refinanced mortgage.
By removing some of the impediments to refinance, lenders can more easily participate in the program allowing more eligible homeowners to take advantage of the low interest rates. While HARP is only one refinancing program, it is a critical one for those homeowners who may be underwater on their mortgage.
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