The U.S. Department of Treasury approved an Oregon pilot program under the Hardest Hit Fund to assist underwater homeowners in Multnomah County (incorporates Portland) to refinance their mortgages.

The pilot program is based on Senator Jeff Merkley’s proposal titled, "The 4% Mortgage: Rebuilding American Homeownership." The proposal would allow underwater homeowners that are current on their mortgages a chance to refinance to a lower interest rate.

Oregon will pilot the program using $10 million of the $220 million from the Hardest Hit Fund, members at the Oregon Housing and Community Services told HousingWire. 

While OHCS expects the pilot program to only refinance roughly 50 houses in Multnomah County, which is the hardest hit county in Oregon, the pilot program will hopefully address the issue nationally to help underwater homeowners in the future.

Other states are said to still be in the development phase of their Hardest Hit options. However, Oregon is the first to have a program in motion.

"The Hardest Hit Fund allows the states hardest hit by the housing crisis to implement innovative ideas to help struggling families avoid foreclosure," the Treasury said. "Through the program, states can directly address the distinct needs of the homeowners struggling in their state." 

The Merkley plan would be similar to the Home Affordable Refinance Program, where 1.8 million borrowers have mortgages backed by both Fannie Mae and Freddie Mac.

"HARP is designed to help homeowners refinance their first mortgages, if their mortgage is government-guaranteed, which by itself excludes half of all American homeowners. HARP also suffers from the complexities involved in first and second mortgages," Merkley noted. "In addition, HARP’s rules give the current mortgage servicer a distinct advantage in issuing the refinanced mortgage."