A U.S. regulator is starting a campaign to encourage as many as 2 million borrowers with mortgages backed by Fannie Mae and Freddie Mac to refinance with a government program for properties that have lost value.
Federal Housing Finance Agency officials convened focus groups this year to find out why borrowers paying interest rates as high as 7 percent hadn’t tried to lower their monthly payments through the Home Affordable Refinance Program. They found many didn’t realize they were eligible.
“There’s a perception among some that you’ve got to be delinquent in order to have some government-sponsored program that can help you,” said Edward DeMarco, acting director of the Federal Housing Finance Agency. “What we want to do is correct that misperception.”
The effort, which started Monday, could help spur the flagging refinancing boom in the U.S. Applications have fallen 65 percent after interest rates rose more than a percentage point since May, according to the Mortgage Bankers Association. Home Affordable Refinance Program applications, which account for 40 percent ofall refinance activity, fell 54 percent in the same period, according to the association.
Depending on interest rates and home prices, the Federal Housing Finance Agency estimates that there are 1 million to 2 million borrowers eligible for the Home Affordable Refinance Program who are paying above-market interest rates and who have little or no equity in their homes.
The average rate on a 30-year home loan was 4.5 percent last week, a five-week low, according to Freddie Mac data.
To refinance through the Home Affordable Refinance Program, borrowers must be current on their payments and mortgages backed by Freddie Mac, the Federal Home Loan Mortgage Corp., or Fannie Mae, the Federal National Mortgage Association, that were originated before June 1, 2009. Borrowers also can’t have more than 20 percent equity in their homes. The program ends in December 2015.
The marketing campaign relies on social media and other free exposure. The Home Affordable Refinance Program recruited celebrity Realtor Mike Aubrey, host of the HGTV television program Power Broker, to record public-service announcements that will air in nine cities with the steepest home-price declines during the housing collapse, including Miami, Cleveland and Atlanta. The agency also is providing promotional materials to lenders.
“These are people who are making payments on their houses, and I can assure you they will get better deals even with rates rising,” Aubrey said. “Is there going to be some point of no return? Absolutely, and that’s one of the reasons there’s a sense of urgency to do it right now.”
About 2.7 million borrowers already have participated in the Home Affordable Refinance Program. Refinances through the program doubled in 2012 after officials extended it to borrowers whose mortgages were more than 25 percent higher than the value of their properties.
The Home Affordable Refinance Program’s focus groups found many people don’t know about the policy change.
“Some folks may have tried before and found themselves not eligible and may not have realized that the eligibility standards have changed,” De-Marco said.
Other cities targeted for the marketing campaign are Chicago; Detroit; Las Vegas; Tampa, Fla.; Orlando, Fla.; and Riverside, Calif.
Business, Pages 21 on 09/24/2013