The federal government wants more homeowners to know about a federal program that lets borrowers refinance mortgages on properties that have lost value.
The Federal Housing Finance Agency is trying to encourage as many as 2 million borrowers paying interest rates as high as 7% to refinance through the Home Affordable Refinance Program, according to a Bloomberg report. FHFA convened focus groups earlier in the year to find out why more borrowers weren’t taking advantage of the program and found that many didn’t realize they were eligible.
“There’s a perception among some that you’ve got to be delinquent in order to have some government-sponsored program that can help you,” Edward J. DeMarco, acting director of the FHFA, told Bloomberg Monday. “What we want to do is correct that misperception.”
According to FHFA estimates, there are between 1 and 2 million homeowners who are paying above-market interest rates and are eligible for HARP, Bloomberg reported. Eligible borrowers must have Freddie Mac- or Fannie Mae-backed mortgages originated prior to June 1, 2009, be current on their payments and have no more than 20% equity in their homes.
The program expanded in 2012, extending eligibility to homeowners whose mortgages were more than 25% higher than the value of their homes.
“Some folks may have tried before and found themselves not eligible and may not have realized that the eligibility standards have changed,”DeMarco told Bloomberg.
The recent refinancing boom has hit a wall, with applications plunging 65% as interest rates have risen in recent months. Interest rates hit a 5-week low of 4.50% last week after the Federal Reserve announced it would not be winding down its $85bn-per-month bond-buying program for the time being.