By Peninsula Daily News
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A popular government program enabling underwater borrowers who are current on their home mortgages to refinance at lower rates will be extended for two more years.
The Obama administration's HARP — Home Affordable Refinance Program — had been scheduled to expire at the end of this year. HARP now will run through 2015, regulators announced Thursday.
More than 2.2 million borrowers with little or no home equity have refinanced using the 4-year-old HARP, and consumer advocates and lenders welcomed the news of the extension.
"It's a godsend for people who have kept making mortgage payments even though they owe more than the house is worth," said Barry Zigas, director of housing policy at the Consumer Federation of America.
The program is available to certain borrowers whose loans are owned or guaranteed by Fannie Mae and Freddie Mac, the government-controlled home finance companies that back about two-thirds of all residential mortgages.
Since Fannie and Freddie already are on the hook for losses if these loans default, their risks actually go down if borrowers who have diligently paid on underwater mortgages can lower their payments by refinancing at today's low mortgage rates.
The loans must have been sold to Fannie Mae and Freddie Mac no later than May 31, 2009. Borrowers who already have used HARP to refinance cannot do so again unless their previous HARP loan was written by Fannie Mae from March through May 2009.
To qualify, borrowers must owe more than 80% of the current home value. They can't have missed a payment for the last six months and are allowed to have been late by 30 days only once in the last year.
Borrowers can go to a Fannie Mae website, www.knowyouroptions.com/loanlookup, or to a Freddie Mac site, ww3.freddiemac.com/corporate, to find out if their loans were sold to the companies.
Fannie and Freddie's regulator, the Federal Housing Finance Agency, said it plans to conduct a nationwide campaign to educate borrowers about the refinance program.
The latest version of HARP, announced in October 2011, has been a success because certain changes were made.
Appraisal requirements were waived, lenders were granted better legal protections against claims that the mortgages were flawed and a size limit of 125% of the home's value was lifted.
About 2.7 million underwater homeowners remain eligible for HARP loans, according to online lender Quicken Loans, which said the average savings from a HARP refinance is around $200 a month with an average rate reduction of 1.75 percentage points.
Wells Fargo & Co., the largest mortgage lender and servicer, said it had done more than 550,000 HARP refinances as of February, calling the program "an example of the kind of success that can be achieved when the government and the industry collaborate for the benefit of consumers."