If you’ve been unable to refinance your mortgage because your loan is underwater, you’ll be happy to learn that the Obama administration has announced sweeping changes aimed at helping homeowners like you. More specifically, if your loan was sold to Fannie Mae or Freddie Mac on or before May 31, 2009 and your loan-to-value ratio is 80% or higher, you could benefit.
The biggest change here is that they’re removing the old ceiling of 125% LTV ratio from the Home Affordable Refinance Program, which unilaterally excluded even the best borrowers if they lived in an area where home values had plummeted. To qualify, you have to be current on your loan payments, have no late payments in the past six months, or not more than one late payment in the past twelve months, and you cannot have previously refinanced under the HARP program.
As far as the lenders go, they no longer need to warranty their loans, which required them to buy back loans from Fannie Mae or Freddie Mac if the borrowers defaulted. This change will reduce lender liabilities and should make them more willing to work with borrowers. The White House is hoping that increased ability to refinance to a lower mortgage rate will keep people in their homes and spur spending as monthly mortgage obligations decrease.
Specific details will be made available to lenders by November 15th, though certain aspects of the program won’t go into effect until next year.