Those who hold mortgages, but have little or no equity in their homes will be happy to know that they might still be able to take advantage of the Home Affordable Refinance Program, an initiative that was meant to give borrowers the opportunity to refinance at a lower rate, but that has made little progress; fewer than 200,000 out of nearly 5 million homeowners federal regulators had hoped to help have opted to refinance.
President Obama announced on Monday that the program aimed to help make mortgage payments more affordable will be extended to June of 2011. The acting director of the Federal Housing Finance Agency, Ed DeMarco, commented that, though the conditions have not changed significantly since the launch of the refinancing initiative, in order to “support and promote market stability,” the program has been extended for another year.
The Home Affordable Refinance Program was put into place as a way to help those whose mortgage loan balances were higher than the value of their property.
Borrowers who are “upside down” on their mortgages are, of course, at the greatest risk for foreclosure; the administration hoped that, with this program, lower payments would decrease the likelihood of individuals foreclosing.
Unfortunately, the initiative ran into some problems: many of the mortgage holders were too far underwater to qualify for the initial program that was limited to mortgages backed by Fannie Mae or Freddie Mac; it got bogged down because lenders struggled to update their systems in order to accommodate the program; and many borrowers had second mortgages and/or private mortgage insurance (PMI) – both of which can get in the way of primary loan refinancing.
Another issue was that the costs involved in refinancing, closing costs, for instance, were discouraging to homeowners who worried about losing their jobs, getting struck by future financial difficulties, and the costs not being “worth” the lower interest rate they’d be receiving.
Thomas Lawler, a housing consultant in Vienna feels that “the overall volume last year was an embarrassingly small amount” and says, “I don’t think it will make a big difference” to have the program extended.
Time will tell, of course, but, in the mean time, those who are concerned about needing to foreclose on their homes may want to consider taking advantage of the extension of this particular program.
