Akron Beacon Journal...
Desperate homeowners
October 27, 2011 

The number of homeowners who owe more on their home loans than the houses are worth is estimated to be more than 10 million. Typically, the borrowers are stuck with high interest rates, unable to refinance at current low rates. They are no more likely, in a weak market, to sell their properties to pay off “underwater” mortgages. Many face an unpleasant choice: To keep paying down the mortgage or to default. 

The mortgage dilemma is a considerable drag on the housing market and on the economic recovery. The Obama White House recognized as much two years ago, launching the Home Affordable Refinance Program to ease the crunch for borrowers in trouble. The program, unfortunately, has been nowhere near the success expected of it. The retooling announced this week by the Federal Housing Finance Agency was long past due. 

The new plan is a welcome improvement, reaching out to borrowers whose mortgages are underwater or who have a little equity in their homes. The plan makes refinancing a real option, removing some of the barriers that confront such borrowers. For instance, the feds have negotiated an agreement with mortgage companies that will enable borrowers with second mortgages to refinance their first loans without having to get permission first from the second mortgage lender. 

Among the changes, the retooled HARP reduces refinancing fees, erases some costs for borrowers refinancing into shorter-term mortgages and eliminates the need for new property appraisals in some cases. It also waives some responsibilities lenders assume when they make loans backed by Freddie Mac and Fannie Mae, the government-held mortgage companies. 

Estimates are that the changes will enable at least 1 million more borrowers to refinance troubled mortgages. Without question, the retooled HARP is a lifeline for desperate homeowners, who will benefit from significantly lower and, likely, more sustainable monthly payments. 

Unfortunately, the program still would not help nearly enough borrowers to make an appreciable dent. Eligibility is limited. The changes apply only to the fraction of loans owned or guaranteed by Freddie Mac and Fannie Mae on or before May 31, 2009, and to borrowers who haven’t missed a payment in the past six months and have only one late payment in the past 12 months. Still in deep water are millions of borrowers whose loans are not guaranteed by Freddie and Fannie. 

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