Posted by Mike Beene - The Federal Housing Finance Agency (FHFA)
announced Monday steps to ease the requirements for many Americans to refinance their homes. The program being revised is called the Home Affordable Refinance Program (HARP). To be eligible your existing mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009 and the borrower must be current on mortgage payments with no late payments in the last six months and no more than one payment in the last twelve months. In addition, the current loan to value ratio must be greater than 80%, but the change puts no maximum loan to value ratio for a fixed rate mortgage. So, the falling value of your home alone will not be an obstacle.
Many would agree that this is a good way to give responsible homeowners the benefit of current low interest rates, thus freeing up the additional money each month for the economy. Others argue that government has done enough already and needs to get out of the way and let the markets work. It remains to be seen how strong the rhetoric will become, but the order at least seems to hit a middle ground that has some logic and bipartisan support.
I am hesitant to approve of any program which would interfere with the constitutional sanctity of contract, but the HARP program and extension do not go so far as to forgive people of their legally contracted debts. If the government was partially involved in policies that caused your home value to drop and at the same time interest rates to come down, the least that could be done is to, within some parameter, give you the chance to take advantage of the new rates.