Many homeowners who are trying to refinance, but can’t because they are “upside-down” have just been thrown a life-line. The Home Affordable Refinance Program (HARP) has just been expanded from the present loan-to-value (LTV) of 105 to 125 percent. This increase is aimed at keeping more people in their homes and out of foreclosure or short-sale situations.

Previously, homeowners with an LTV greater than 105 percent could not refinance under HARP. This often lead to financial hardship and even foreclosure for many of those homeowners who saw their mortgage payments increase once their rate reset up.

With the LTV raised to 125 percent, many of those who did not previously qualify now do. Those who now qualify under the raised ceiling may be able to lower their mortgage payments and/or better budget their money with a new (lower) fixed mortgage rate. This should help keep more people in their homes.

There are some restrictions:

  • The loan mush be currently owned or guaranteed by Fannie Mae or Freddie Mac
  • The homeowner(s) must be current on their mortgage payments
  • The homeowner(s) must meet all HARP criteria

Here’s the official Federal Housing Finance Agency press release and fact sheet (click here if you don’t see the document below):

Fannie Freddie Raise Refi LTV to 125% 7-1-09