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Government Refinance Program Gets One-Year Extension

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Federal Housing Finance Agency (FHFA) acting director Ed DeMarco today announced the extension of the Home Affordable Refinance Program (HARP), for an extra 12 months, until June 30, 2011. HARP, administered by Fannie Mae (FNM) and Freddie Mac (FRE), is the refinance branch of the administration’s Making Home Affordable Program announced last February. It was designed to permit refinancing for an estimated 4-5m people whose loans are owned or guaranteed by the GSEs. Fannie Mae and Freddie Mac purchased or guaranteed more than 4m refinanced mortgages in 2009, according to the FHFA. Of this total, 190,180 were HARP refinances with LTVs between 80% and 125%. The HARP program expands access to refinancing for qualified individuals and families whose homes have lost value, FHFA said. The program was set to expire on June 10 of this year. “FHFA has reviewed the current market situation and the state of mortgage insurance availability and has determined that the market conditions that necessitated the actions taken last year have not materially changed,” DeMarco said in a press release. He added: “Accordingly, to support and promote market stability, and to encourage lenders and other mortgage market participants to fully adopt the HARP program, including the implementation of the October 2009 expansion of loan-to-value ratios (LTVs) to 125%, FHFA is authorizing the extension of HARP until June 30, 2011.” The expansion to 125% LTV was meant to broaden the program’s reach to deeply underwater borrowers. Critics for months had argued the 105% LTV limit could not reach borrowers that needed it most — those who purchased more than three years earlier, with little money down and when house prices hit a peak. The move into higher LTVs was met by Genworth Financial (GNW) estimates the new LTV limit would qualify an additional 65% of loans it insured in the states hardest-hit by home price declines. FHFA, in its first 5-year strategic plan in July 2009, placed a greater priority on refinancing through HARP. Write to Diana Golobay.

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