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Home-Refinancing Program Overhauled

WASHINGTON — Federal officials on Monday announced an overhaul of the Obama administration’s much-criticized home-refinancing program, easing rules and reducing fees to allow as many as 1 million more homeowners to take advantage of historically low mortgage rates.

To qualify, borrowers must be current on their payments but homeowners who are underwater — meaning they owe more on their homes than the homes are worth — would now be eligible.

The Federal Housing Finance Agency said the old rule that eliminated borrowers who owed more than 125 percent of the value of their homes from refinancing for a government guaranteed mortgage was being removed.

Borrowers who refinance under this program also would see certain fees — closing, title insurance and lien processing, appraisals — reduced or eliminated.

Thousands of New Mexicans could be eligible for the program. More than 25,000 mortgages in the state are considered underwater — 11 percent of all outstanding mortgages — and another 10,000 are close to negative equity, according CoreLogic, a real estate data research firm.

The program is for borrowers with mortgages taken on by Fannie and Freddie on or before May 31, 2009. To qualify, they cannot have had a late payment in the past six months and no more than one late payment in the past 12 months.

The savings could be significant. For example, a homeowner with a $200,000 mortgage at 6 percent could refinance down to 4.5 percent, saving $3,000 a year.

Government officials estimated that up to 1 million more people could qualify. Moody’s Analytics says the figure could be as high as 1.6 million. About 11 million or more homeowners are underwater, according to CoreLogic.

The changes were announced by the independent Federal Housing Finance Agency, which has been working with the White House to revamp a 2 1/2-year-old program that has fallen well short of expectations.

Additionally, in what lenders have said was a critical change if they are to become more involved, the government is waiving certain so-called reps and warranties for lenders that made it more financially risky to take on more home loans.

Financial institutions won’t have to buy back the mortgages from Fannie or Freddie, as they previously had to when dealing with some risky loans. That change will free many lenders to offer refinance loans.

One Albuquerque lender told the Journal recently that refinancing activity has been good in the metro area but could be better, although his company had not dealt with the Housing Affordable Refinance Program because of restrictions.

“The problem that we have is that people don’t understand that we have plenty of money and the rates are cheap,” said Bill Elliott, of Rocky Mountain Mortgage.

Industry groups greeted the changes with qualified support. “It’s a good tool in the toolbox,” said David Stevens, president of the Mortgage Bankers Association.

While the changes help, he cautioned, they won’t do anything for the 4.2 million delinquent homeowners. They also don’t apply to millions of mortgages held outside Fannie and Freddie.

Fannie Mae and Freddie Mac acquired 80 percent to 90 percent of home loans originated between 2001 and 2008. There are about 281,000 outstanding mortgages in New Mexico, according to the Mortgage Bankers Association’s National Delinquency Survey for the second quarter of this year. Of those loans, 6.4 percent were past due on mortgage payments. The overhaul announced Monday won’t help them.

Underwater homeowners in the hardest-hit states of Arizona, California, Florida and Nevada are expected to be helped the most. Many are stuck with high mortgage rates after they were approved with little or no money down and few requirements.

Journal staff and the Associated Press contributed to this story.
— This article appeared on page A1 of the Albuquerque Journal

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