U.S. officials are discussing how they might help a wider range of homeowners refinance by building on an effort targeted at borrowers who owe more than their home is worth, a top housing official said Wednesday.
Housing and Urban Development Secretary Shaun Donovan said the idea would be to help homeowners who have ample equity, but have had trouble refinancing.
"There is a real opportunity to improve and increase refinancing more broadly, given where interest rates are," he told reporters.
He said the recent adjustments made to the Home Affordable Refinance Program might be extended to borrowers who do not qualify. Currently, HARP is limited to loans that Fannie Mae and Freddie Mac guarantee and borrowers who owe at least 80 percent of their home's value, even those with no equity at all.
He said the administration is in discussions with the regulator of the two mortgage-financing giants on how "innovations of HARP" could be applied to those who owe less than 80 percent of their home's value.
"Our hope would be that these practices could become adopted industry-wide so that it could help streamline the refinancing process more broadly," Donovan said.
HARP was introduced by the Obama administration to assist homeowners at risk of foreclosure and is designed to reach borrowers who are making their mortgage payments but have been locked out of refinancing because they have little or no equity. Last week, the regulator, the Federal Housing Finance Agency, lifted some barriers to increase participation.
Donovan said potential changes to streamline the refinancing process to those borrowers not currently eligible for HARP could include finding ways for the mortgage industry to lift certain fees and specific appraisal requirements when borrowers lock into new loan terms.
Mortgage rates, currently hovering around 4 percent for a 30-year fixed-rate loan, have yet to spur a refinancing wave. The administration's goal in tweaking HARP was to lower mortgage payments for as many as 1 million homeowners, freeing up cash for other spending.
HIGHER LOAN LIMITS AN ISSUE
Donovan also said the administration has not changed its position on whether or not higher limits for mortgages guaranteed by the government should be restored.
Some members of the House are trying to encourage leaders to introduce legislation to raise the maximum size of a home loan backed by Fannie Mae, Freddie Mac and the Federal Housing Administration to $729,750.
The cap fell to $625,500 in the most expensive real estate markets last month.
"Honestly, we'll have to see what the House decides," Donovan said.
The Senate has already adopted a measure that would raise the so-called conforming loan limit back to $729,750 through 2013. The measure was attached to a spending bill that is scheduled to be considered by a joint appropriations committee this week.
Donovan said that congressional debate on the loan limits has yet to change the Obama administration's long-term view that there is a "need to reduce the government's footprint" in the housing finance system and attract more private capital to step in.
"We've always said that we have to make sure that we're taking these steps in concert with what's happening in the market and ensuring that we're supporting recovery," he said. "Obviously, that's the debate Congress is having, which is, 'Did they go down too soon?"'
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