by Amy Lillard
July 2, 2009 - The Making Home Affordable refinance program was expanded this week to include more borrowers in trouble, the U.S. Housing and Urban Development (HUD) announced yesterday. The expansion now covers homeowners who are current on their payments, but up to 125% underwater on their mortgage.
“This decision is part of our ongoing efforts to maximize the effectiveness of the Making Home Affordable program and adapt to an ever-changing housing market,” said Treasury Secretary Tim Geither in a statement after the announcement. “By expanding refinance eligibility, we can bring relief to more struggling homeowners more quickly. It's a crucial step in our broader efforts to get America's housing market and economy on the path to recovery.”
Currently, only those borrowers whose first mortgage does not exceed 105 percent of the current market value of their property are eligible for the program, which refinances mortgages currently owned or guaranteed by Fannie Mae and Freddie Mac.
The Making Home Affordable refinance plan, first unveiled in February, was targeted at homeowners who were current on their mortgages but couldn't take advantage of lower interest rates because their homes had fallen in value, below what they still owed on their mortgages. Homeowners and housing advocates have since criticized the plan for the limits on the amount borrowers owe. They have and do believe it leaves many homeowners vulnerable.
In its report on this announcement, Newsday notes that even on Long Island, which has been faring better than most places across the nation, property values have dropped more than 5 percent since the subprime mortgage market collapsed in August 2007. There, the median closing price for a home was $365,000 in May, down 8.5 percent from $399,000 a year ago.
The expansion seeks to encompass more of these homeowners and provide a greater safety net for those in trouble. While the bulk of homeowners that have thus far taken advantage of this program have equity in their homes and don't have loan-to-value ratios approaching 105%, HUD hopes this expansion will reach the people that most need the help.
"The president's Making Home Affordable plan is already helping far more families than any previous foreclosure initiative, and with today's announcement we will extend its reach still further," HUD Secretary Shaun Donovan said in the announcement.
The announcement was made in Las Vegas, ground zero of the foreclosure crisis. More than two-thirds of current mortgage holders in the market have mortgages higher than their property is currently worth. HUD also announced Foreclosure Rapid Response Teams that will be assessing areas hardest hit by foreclosures, starting in Las Vegas.
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