More Mortgage Relief

The Department of Housing and Urban Development has announced an expansion of its Making Home Affordable Refinancing Program. Homeowners who are as much as 25% underwater on their mortgages may be able to refinance. In other words, if your mortgage balance is as much as 125% of the current value of your house, and your mortgage was bought or guaranteed by Fannie Mae or Freddie Mac, you may be able to refinance. This is a considerable improvement over the original criteria for this program (only mortgages not more than 5% underwater were eligible for refinancing), and over commercial refinancing standards (you probably need 20% equity or more in the house). The interest rate for the new program's refinancings is likely to be higher than current market rates for prime borrowers, and naturally there will be charges and fees for refinancing. But underwater homeowners can't get prime borrower rates anyway for refinancings.

If you have a loan with a high interest rate, or one that could adjust upward, you may want to see if you can refinance under this program. Don't wait until you're close to defaulting because the process for refinancing takes time. To participate in the expanded program, you need to have been current on your monthly payments for at least the last twelve months. Also, it will probably be several weeks before lenders have their computer systems set up to handle applications using the new 125% underwater standard.

For more information about the new program, go to http://www.makinghomeaffordable.gov. We also discuss a number of other resources for mortgage payment problems at http://blogger.uncleleosden.com/2007/12/how-to-handle-mortgage-default.html.