Banking Law

More Underwater Borrowers Will Get Refinancing Help Through Changes in FHFA Program


More homeowners who are underwater on their mortgages will be eligible for a refinancing program as a result of changes announced today by the Federal Housing Finance Agency.

Borrowers with mortgages backed by Fannie Mae and Freddie Mac before June 2009 will be eligible for the refinancing program, no matter how much their homes have dropped in value, report the Wall Street Journal (sub. req.), Bloomberg, the Washington Post and a press release (PDF).

Previously the Home Affordable Refinance Program allowed borrowers to participate only if their loans were no greater than 125 percent of the property value. The changes eliminate the cap, drop fees for refinanced loans of 20 years or less, and eliminate the need for new appraisals.

The program will encourage banks’ participation by relieving them of the risk they will be forced to buy back the mortgages due to underwriting flaws, as long as borrowers can prove they made their last six mortgage payments and have a job or other source of income, the Wall Street Journal says.

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