Obama's New Home Loan Refinancing Plan Explained
Over the past two years, President Barack Obama has made refinancing the centerpiece of his policy response to the housing bust. Tuesday’s State of the Union address could touch on refinancing, but isn’t likely to go into specifics.
Here’s a more detailed look at what the administration has done, and what it’s likely to push for in the coming year:
Home Affordable Refinance Program
Who is eligible: Homeowners with loans that were backed by Fannie Mae and Freddie Mac before June 2009 can refinance as long as they are current on their mortgage payments. Initially, HARP was limited to borrowers who owed between 80% and 105% of their home’s current value. It was expanded in 2009 to borrowers that owed 125% of their home value, but it had disappointing results.
In late 2011, after much prodding from the Obama administration and the Federal Reserve, the companies and their regulator, the Federal Housing Finance Agency, revamped the program. The biggest of these changes eliminated the cap on loan-to-value ratios. The FHFA has implemented further changes to the so-called “HARP 2.0” initiative over the past year, and the program was on pace to enable nearly 1 million refinancing last year, more than double the volume from 2011. HARP is set to expire at the end of this year.
(The Obama administration has rolled out a similar program for borrowers with loans backed by the Federal Housing Administration. Borrowers with loans insured before June 2009 can refinance without having to pay new, higher insurance premiums.)
Most industry analysts agree that the program has been quite successful, particularly given the underwhelming results of earlier iterations of refinance and modification programs.
For more information about this program and what it means for you, please call Majestic Home Loan at 1-877-546-2145 and speak to one of our licensed loan officers.