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Efforts to aid underwater borrowers, boost housing market continue

Wednesday, October 26, 2011

The need to spur a housing market recovery has prompted action on the part of government to expand the current Home Affordable Refinance Program (HARP) to help millions of homeowners underwater. Also, the Senate has added an amendment to an existing spending bill that would restore the higher conforming loan limits that expired on September 30.

Borrowers who are current on their home loans may be able to refinance for lower interest rates, even if they are seriously upside down. The Federal Housing Finance Agency (FHFA) announced last week that it will broaden the scope of HARP by removing the current 125 percent loan-to-value cap for fixed-rate mortgages backed by Fannie Mae and Freddie Mac. Other program enhancements include, among other things, reducing certain fees, eliminating the need for a new property appraisal if the FHFA has a reliable automated valuation model (AVM) estimate, and extending HARP until the end of 2013.  New federal guidelines for the HARP changes should be released to mortgage lenders and servicers by Nov. 15.

The basic eligibility requirements for an enhanced HARP loan are as follows:

  • Existing mortgage loan must be owned or guaranteed by Fannie Mae or Freddie Mac. To check whether a borrower has a Fannie Mae or Freddie Mac loan, go to http://www.makinghomeaffordable.gov/get-assistance/loan-look-up/Pages/default.aspx.
  • Existing mortgage loan must have been sold to Fannie Mae or Freddie Mac before June 1, 2009.
  • Existing mortgage loan cannot have been refinanced under HARP previously (except for Fannie Mae loans refinanced between March and May 2009).
  • Current loan-to-value (LTV) ratio must be more than 80 percent.
  • Existing mortgage loan must be current, with no late payments in the past six months, and no more than one late payment in the past 12 months.

Additionally, the Senate last week passed an amendment that would reinstate the higher loan limits through December 31, 2013. This would raise the FHA and GSE loan limits back to 125 percent of the local area median home price (from the current 115 percent) and raise the high cost cap to $729,750 (from the current $625,500). The language would also extend the VA loan limits through the same date.

The Senate must still vote on the overall bill, H.R. 2112, which is now the combined Appropriations bill for the Department of Agriculture and Department of Housing and Urban Development. The Senate is expected to approve that bill, but its future in the House is uncertain.

"Extending the higher loan limits will especially help buyers in high-cost regions like ours," said Gene Lentz, president of the Silicon Valley Association of REALTORS®. "The reduced loan limits are already impacting buyers. According to early data from a National Association of REALTORS® survey, buyers who now find themselves above the new lower conventional conforming loan limit are facing significantly higher interest rates and substantially larger down payments."


The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.

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