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Mortgage refinance program rules changed

The federal government is changing some rules governing

The federal government is changing some rules governing its Home Affordable Refinance Program. The changes are for borrowers current on their loans. Photo Credit: iStock

Some rules will be jettisoned from the federal mortgage refinance program in an effort to boost its popularity among borrowers.

The much-criticized Home Affordable Refinance Program will have two key changes for borrowers, who must be current on their loans. The program covers only mortgages owned or guaranteed by Freddie Mac and Fannie Mae.

Federal officials will get rid of the loan-to-value limits in determining eligibility, so it doesn’t matter how much higher the borrower’s mortgage is compared with the property value.

Also, fees based on the borrower’s credit risk will be reduced for some and dropped for others. Currently, these fees can be as high as 2 percent of the loan amount, with the average borrower paying about 1 percent, federal officials said. The fees will be reduced, federal officials said, and homeowners who refinance into mortgages of 20 years or less won’t be charged any such fees.

Federal officials hope the changes will help more homeowners and cut down the number of defaults on Fannie and Freddie loans.

But one rule keeping Long Islanders from the program won’t be changed. Some borrowers with two loans on their homes want to consolidate the debt into one refinanced mortgage, but the federal program does not permit that.

That turned off Anne Marie Dunworth of Franklin Square. With current interest rates low and her parents needing care, she had looked at the federal program to rescue her from the 5.88 percent rate on her first loan and 8.24 percent on her second.

“It didn’t work for us,” she said. “I’m still suffering.”

That’s because Fannie and Freddie do not own and guarantee second mortgages, and the two mortgage giants don’t want to take on new debt through refinancings, said Meg Burns, head of the policy team at the Federal Housing Finance Agency, which oversees Fannie and Freddie. “You want to keep the risk in the hands of the second lien holder and not put that in the hands of the government,” she said.

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