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Home-loan refinancing to get easier under revised U.S. program

Federal officials announced Monday a sweeping overhaul of the Obama administration’s much-criticized home-refinancing program, easing rules and reducing fees to allow potentially many more homeowners to take advantage of historically low mortgage rates.

The changes were announced by the independent Federal Housing Finance Agency, which has been working with the White House to revamp a 2½-year-old program that has fallen well short of expectations for helping struggling homeowners and reviving a still-moribund housing market.

The Home Affordable Refinance Program is for homeowners with mortgages owned or backed by Fannie Mae and Freddie Mac. Under the new guidelines, which will be issued to lenders Nov. 15, borrowers who refinance under this program would see certain fees reduced or eliminated. The agency is lifting a ceiling that barred borrowers who owed more than 125% of the value of their homes.

Additionally, in what lenders have said was a critical change if they are to become more involved in the program, the government is waiving certain so-called reps and warranties for lenders that made it more financially risky to take on more home loans.

The program’s revamping is part of stepped-up efforts to aid the battered housing market, which increasingly is seen as an obstacle to the broader economy and the fragile recovery. Obama announced in early September that he would help more "responsible" home borrowers to refinance; the president is expected to highlight the program changes in Las Vegas, where the housing market has been hit particularly.

Edward J. DeMarco, acting director of the Federal Housing Finance Agency, said it was difficult to say how many more borrowers would refinance under the new rules, which will be issued Nov. 15.  He told reporters on a conference call that it would depend in part on interest rates and the individual circumstances of borrowers.

Through the end of August, almost 900,000 homeowners with loans owned or backed by Fannie or Freddie have refinanced through the program. The administration, however,  had hoped the program would help several million borrowers.

Even with the new rules, only borrowers with mortgages taken on by Fannie and Freddie on or before May 31, 2009, can qualify. Their loan amounts must top 80% of the current market value of their homes. And they must be current on their payments, with no late payment in the last six months and no more than one late payment in the last 12 months.

That means the program provides no help for the 3.5 million or so homeowners who are seriously delinquent on their loans or in default.

The administration is also working on a program to convert empty homes into rental properties, and it has sought to give temporary reprieves to certain borrowers who lose their jobs.

Article from LA Times, Don Lee