According to the Wall Street Journal, nearly 25% of all U.S. borrowers could eventually gain access to an Obama mortgage refinance program to secure low rate mortgages. At issue are millions of so-called “underwater” borrowers who owe more than their home is worth and can’t refinance to current low rates using traditional means.
The Obama administration’s Home Affordable Refinance Program, also known as HARP, has sought to provide home refinance loans options to some of these underwater borrowers who have no equity in their homes. To qualify, borrowers must have a mortgage is backed by Fannie Mae and Freddie Mac.
HARP currently only allows borrowers to refinance at lower rates with a mortgage that is at most 25% more than their home’s current value. However, that may soon change and millions more could be eligible. The FHFA, the regulator for Fannie and Freddie, said last week it is analyzing whether it would allow borrowers who are even more underwater those homeowners owing even more than that cap to participate.
Approximately 9.8 million mortgages or 25% of all U.S. homeowners have home loan financing that are 20% or more underwater. RealtyTrac reported that almost half of all U.S. home loans 16 million of the 40 million U.S. mortgages are underwater.
Analysts at J.P. Morgan said Friday that they believe changes to HARP mortgage financing are coming, but those changes will happen in “weeks” rather than days. However, both groups of analysts believe another idea that has been floated to encourage banks to refinance underwater mortgages is likely off the table.
