The Obama administration announced this week changes to the Home Affordable Refinance Program (HARP) to allow homeowners to refinance existing Fannie Mae and Freddie Mac loans with loan-to-value (LTV) ratios up to 125 percent. The loans will be eligible for delivery on or after September 1, 2009.
Michael J. Williams, president and CEO of Fannie Mae, said many borrowers in good standing have been shut out from the benefits of refinancing due to major declines in property values across the country.
"By broadening the scope of the initiative, more borrowers will experience savings on their monthly mortgage payments and have a better chance of sustaining homeownership over the long term," Williams said.
Previously, HARP allowed for refinancing of Fannie Mae and Freddie Mac loans with LTVs up to 105 percent. With the expansion, loans with LTVs above 105 percent and up to 125 percent will be eligible.
Fannie Mae said it will offer a special .50 percent reduction in the loan-level price adjustment charged for loans with LTVs above 105 percent and loan terms of 20 and 25 years.
Government sponsored entities including Freddie Mac and Fannie Mae participate in over two-thirds of all single-family mortgage transactions, according to the Mortgage Bankers Association.