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The Federal Housing Finance Agency (FHFA) recently announced chances to its Home Affordable Refinance Program (HARP), making it feasible for homeowners who owe more than their home is worth to refinance at historically low interest rates. Previous rules prevented homeowners who owed more than 125% the value of their home from refinancing, but the most recent change in regulations eliminates that limit. HARP currently brands itself as the only program to allow homeowners who are “upside-down” on their investment to refinance.

With federal interest rates reaching record lows, refinancing has become an appetizing option for homeowners who bought their homes when interest rates were much higher. Refinancing at a lower interest rate usually results in a more favorable loan to the borrower, usually in the form of lower monthly payments, or a quicker loan repayment schedule. Financial institutions, however, are unwilling to refinance mortgages in situations where borrowers owe more than the market value of their home (or the value the home would sell for if it were to be put on sale today).

The changes to regulations also eliminate or reduce many of the fees associated with refinancing through the HARP program.

To be eligible for refinancing under new FHFA rules, borrowers need to have a loan owned or secured by Fannie Mae or Freddie Mac as of May 31, 2009. This can be checked at the websites of Fannie Mae and Freddie Mac. Additionally, you must be up-to-date with your mortgage payments, with no late payments in the last six months and a maximum of one late payment in the past twelve months.

Lenders should start offering refinancing through new HARP rules sometime in December, or early in 2012.

Sources:

http://bucks.blogs.nytimes.com/2011/10/24/new-refi-rules-offer-help-to-more-underwater-borrowers/#

http://www.fhfa.gov/webfiles/22721/HARP_release_102411_Final.pdf

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