A group of 10 senators sent a letter to President Obama Wednesday asking him to extend relief under the Home Affordable Refinance Program to borrowers with more equity in their home, not just those who owe more than their home is worth.
Last week, the Federal Housing Finance Agency removed
several barriers to refinancing for underwater borrowers with loans guaranteed by Fannie Mae and Freddie Mac. The changes eliminated upfront fees, loan-to-value ratio caps, appraisal requirements and some representation and warranty risk for lenders.
HARP, launched in March 2009, has allowed 838,000 borrowers to refinance with just 7% holding LTVs above 105%. The new changes are expected to usher between
1.6 million and 3.1 million more borrowers into the program. Borrowers with more than 20% equity still in their home would not qualify.
Currently, roughly 4 million Fannie and Freddie loans are underwater. Sens. Barbara Boxer (D-Calif.) and Johnny Isakson (R-Ga.), co-sponsors of similar legislation, led the recent letter to extend the benefits to all agency borrowers, especially the nearly 12 million additional loans with more equity in their home but are paying interest rates well above 5%.
"While we applaud these measures, they should be expanded to include borrowers with more equity in addition to those with little or no equity," the letter reads. "Not only is this an issue of fairness, but applying these measures to higher equity borrowers makes good business sense. Allowing banks to have a single set of rules for all borrowers will simplify the process and encourage greater participation in the program."
Fannie and Freddie are scheduled to release further guidance on the so-called HARP 2.0 by Nov. 15.
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