Raising the loan-to-value ratio on refinances of underwater mortgages to 125% could help 2.25 million Fannie Mae and Freddie Mac borrowers lower their monthly payments, according to analysts at Amherst Securities Group.
The special refinancing program that Obama administration officials unveiled in February originally limited the refinancing option to loans with LTV ratios of 80% to 105%. On July 1, the Federal Housing Finance Agency raised the LTV limit on the GSE Home Affordable Refinance Program (HARP).
"We think expanding the HARP's limit to 125 makes the program accessible by an additional 8% of the current outstanding agency mortgage universe," an Amherst Mortgage Insight report says.
At today's mortgage rates, "the bulk of borrowers in HARP's expanded LTV range are currently in-the-money," the analysts point out. But any rise in mortgage rates will "immediately begin to reduce the number of borrowers able to take advantage of the program," the July 8 report says.
Fannie will start accepting delivery of the higher LTV refinancings on September 1. Freddie says some borrowers can apply now.
"The expanded LTV ratios are available now when borrowers apply for Relief Refinance Mortgages through their current servicers and will be become available October 1 when borrowers apply through any lender affiliated with Freddie Mac."