For a while now we've been talking about the Obama administration's Making Homes Affordable Refinance and Loan Modification program. We looked at who was eligible for the program, and what you needed to do in order to push through your own refinance or loan modification. According to the administration the plan was going to be able to help anywhere from 7 to 9 million people to get into a more affordable loan, all while not increasing costs through added PMI or other costs.
The reality of what has happened so far is much different. According to the Treasury Department earlier this week, so far only 20,000 loans have been refinanced. That's a far cry from the millions of supposedly eligible homeowners who were forecast to be able to refinance. So what's holding things up?
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Problems With The Program: Why Haven't More People Refinanced
There are quite a few reasons that people speculate the program hasn't been more successful that it could have been.
- With mortgage rates in the low 6's in recent years, for many people refinancing to the mid 5's just doesn't seem worth it after paying for points and high closing costs many banks are offering.
- According to many sources, including commenters on this blog, the program has been slow to ramp up. Borrowers have complained that banks are not approving their applications. People at the banks often don't seem to have any idea what the program entails. Homeowners are getting the run around, and are being given refinance offers that aren't really much of a deal.
- Many homeowners have seen dramatic drops in their home's value in recent months/years, which means they don't have the required 105% LTV ratio needed to benefit from the refinance program. (This week's changes to the program should help address this).
Changes To The Program: 125% LTV Loans Now Available
The Obama administration eased eligibility rules on July 1st for the Home Affordable Refinance Program, lifting the maximum loan-to-value ratio to 125 percent from 105 percent. So that means the eligibility requirements for the program are now as follows:
- Loans originated on or before January 1, 2009.
- Your loan is is owned/backed by Fannie Mae or Freddie Mac.
- You are current on your mortgage payments, no 30 day deliquencies in the past 12 months.
- You have income to support the new mortgage payments.
- Your first mortgage will not exceed 125% of the current market value of the property.
The new requirement of no more than a 125% mortgage to home market value ratio should allow quite a few more people the chance to apply for a refinance under the HARP program.
If your loan is owned by Freddie Mac and you are refinancing through your current servicer, the expanded LTV ratios are available now. If you are refinancing through another Freddie Mac lender, the expanded ratios will become available October 1st.
If your loan is owned by Fannie Mae you must use your current loan servicer to refinance your mortgage, but you must wait until September 1, 2009 before you can take advantage of the expanded LTV program (You must wait if your LTV is more than 105%).
A Step In The Right Direction?
Administration officials are confident that the new program requirements should help a lot of people, and the changes are crucial in helping continue the recovery.
Treasury Secretary Timothy F. Geithner said the move was “a crucial step in our broader efforts to get America's housing market and economy on the path to recovery.”
I'm not as confident as they are that this will really help to improve things (given the program's track record so far), but I really hope that they're right.
Want to find out more details about the program? Check out the government's website at http://www.makinghomeaffordable.gov/, and read our articles that we've previously written on the topic:
- Do I Qualify For The Making Home Affordable Program?
- My Experience With the HARP program
- FAQ – Modification Program
- FAQ – Refinance Program
- Making Home Affordable Loan Mod Program And Second Mortgage Modifications
Do you think that the expanded loan to value ratio will allow more homeowners to take advantage of the Home Affordable Refinance Program (Will it help you?)? Will problems with the program being implemented by banks continue to plague HARP? What's your take on the program? We're interested on hearing your personal experience!