(CNSNews.com) - New Obama administration policies taken without congressional authorization would expand refinancing opportunities for people with underwater mortgages.
This would mean at least 1.69 million people who owe more on their home than it’s worth could refinance through Fannie Mae or Freddie Mac, according to the Federal Housing Finance Agency (FHFA), which regulates the two mortgage government-sponsored enterprises. Though federal officials assert it is difficult to gain a certain estimate.
“At this point there is significant uncertainties as to what the full universe of eligible borrowers are who could benefit from the changes announced today and that could be announced in the future,” Gene Sperling, director of the White House National Economic Council, said during a conference call with reporters on Monday.
“I think what’s important to know is that today’s announcement is a very significant step in moving more families who have met their responsibilities into a position to refinance at significant savings,” Sperling added.
As of Aug. 31, the FHFA says 894,000 borrowers have refinanced through the Home Affordable Refinance Program (HARP), a program designed to expand refinancing.
Under the changes to HARP announced Monday, that would likely double, FHFA announced in a news release. The program is open only to loans sold to Fannie and Freddie on or before May 31, 2009.
“Given current market interest rates, our best estimate is that by the end of 2013 HARP refinances may roughly double or more from their current amount but such forward-looking projections are inherently uncertain,” The FHFA release said.
Because it is a refinance program it is not possible to estimate the cost for the two government-sponsored enterprises, FHFA spokeswoman Stefanie Johnson said.
The new rules would eliminate various fees that borrowers pay when they refinance into a short-term mortgage. The rules also remove the current 125 percent loan-to-value ceiling for a borrower to get a lower rate and refinance. The rules eliminate the need for new property appraisals.
“We know today we have far too many Americans who have done all the right things, paid their bills. They’re current on their mortgages, and they’re still stuck with six or seven percent mortgages, because home prices in their neighborhoods have been ineligible for refinancing,” Housing and Urban Development Secretary Shaun Donovan told reporters during a conference call Monday.
“Today we’re very pleased to see that the FHFA has announced a series of steps in this direction that will help responsible borrowers with little or no equity in their homes to take advantage of today’s record low interest rates,” Donovan continued.
Lenders could apply the new rules for mortgages as early as Dec. 1, according to the FHFA. Since HARP was established in April 2009, Fannie and Freddie helped approximately 9 million borrowers refinance their homes.