Three months after the Oba-ma administration announced a revolutionary refinance plan for severely underwater homeowners, most borrowers are still unable to apply.
Technological barriers, as well as lingering questions about the new Home Affordable Refinance Program, have left many optimistic homeowners in a holding pattern as they watch interest rates bump around near record lows. Last week's 3.98 percent for a 30-year fixed-rate loan marked the eighth consecutive week that the average was below 4 percent.
But a mid-March update to automated loan approval systems at federal mortgage backers Fannie Mae and Freddie Mac should start things flowing, mortgage brokers said.
The automated systems are set to reject refinances on loans where the borrower owes more than 25 percent on the loan over what the home is worth - the limit under the old federal Home Affordable Refinance Program .
HARP 2.0, as the new program is sometimes called, has no cap for most refinances.
Until Fannie and Freddie update the underwriting program, banks that give refinances to severely underwater borrowers don't know if the two enterprises will buy the loans or if the banks will be stuck with them on their books.
"If the loan is ineligible with Fannie, then you are underwriting it at your own risk, and it's that risk that no one is willing to take," said Tina Mulligan, vice president of the Florida Association of Mortgage Professionals. "You won't see many applications being taken until probably after March 1."
Fannie Mae and Freddie Mac buy home loans from lenders with a guarantee against default and sell them to investors worldwide. They own or guarantee about half of all U.S. mortgages.
Only Fannie Mae and Freddie Mac loans are eligible for HARP 2.0.
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