Just yesterday the Federal Housing Finance Agency (FHFA) announced that they would be making changes to a govement program that could help homeowners who are underwater with their mortgages. With mortgage rates so low lately, many homeowners are trying to refinance but are unable to because their home will not appraise at an appropriate price. This is unfortunate for them because the change in market is no fault of their own however they are penalized for it.
The program FHFA is proposing to change is the Home Affordable Refinance Program (HARP). Currently, this program aims to help borrowers who are in this specific situation referred to before, wanting to refinance but running into problems because their home value has dropped. Because FHFA has seen so many instances where HARP could have helped homeowners but they were unable to meet the guidelines, FHFA is going to be changing some of those guidelines.
A couple of the items they have agreed to change are the cap that disqualifies any homeowners who mortgage exceeds 125% of the property value and appraisal requirements. Previously, if a homeowners mortgage exceeded 125% of the property value that homeowner would not be eligeable to participate in the program. They have not stated an exact change, but FHFA will be altering that cap so more homeowners can participate. Also, in many circumstances they have stated they may not even require an appraisal.
So, what does this mean for homeowners underwater?? Well, just like many of the other goverment programs that have been rolled out to help the housing market, only time will tell how affective these changes may be. The majority of the other programs has failed to meet expectations or keep promises made in the beginning.
The main homeowner this will help is those who are underwater on their home but do not financially qualify for a short sale. The HARP program should be able to help those homeowners adjust their mortgage to the current housing market state and then be in a better position to sell in the future. This, in turn, then should lower the number of short sale as we move into the next few years.
Researches say these new guidelines could help an additional 1 million homeowners of the 11 million who are underwater. Yes, you read that right, only 1 million of 11 million.