On July 1, 2009 in Las Vegas, housing Secretary Shaun Donovan announced modifications to the initial Home Affordable Finance program. Homeowners who owe up to 125% more than their home value can now benefit from this plan. The original cap was 105% so it is a safe bet to say that many will benefit from this change.

A second part of the program helps homeowners lower their monthly payments. It is worthwhile for borrowers to explore their eligibility for this initiative. They also need to consider if this latest rescue effort is right for them.

Who Is Eligible For the Extended Benefits?

The expanded Home Affordable Finance Program (HARP) reaches out to a high percentage of homeowners. Many borrowers can't find financing due to a decrease in their home value. This revised plan can provide help if the homeowner meets certain specifications

The level of loan-to-value will now extend to 125% compared to the earlier 105%. A borrower must be current on their mortgage payments. The mortgage must be owned by Fannie Mae or Freddie Mac.

The extended benefits apply only to first mortgages. The first mortgage must not exceed 125% of the current value of the home. The homeowner must take out a new 15, 25, or 30 year fixed rate mortgage.

Is There A Deadline In Place For This Expanded Program?

The refinancing program ends in June, 2010. There are other important dates, however, to note in this initiative. Freddie Mac and Fannie Mae have different guidelines in place.

Home owners with a Freddie Mac loan can access the program immediately - if they use their current loan provider. If they wish to use a different lender, they will have to wait until October 1 to get the expanded benefits.

Borrowers with Fannie Mae loans must use their current lender to refinance their new mortgage. Some Fannie Mae borrowers can't take immediate advantage of the program. Anyone who owes more than 105% of their home value must wait until September 1, 2009.

Do The Modifications Offer Any Help With Loan Payments?

The expanded program has 2 parts - one reaches out to 125% loan-to-value, the other offers assistance with loan payments under certain conditions. The new plan addresses the issues of homeowners who are in default or at risk of default. The modification means that they can lower their monthly payments to no more than 31% of their pre-tax income.

Should Borrowers Take Advantage Of The Extended Program?

The modifications to the current program are expected to open up refinancing for an extra 2,000,000 homeowners. The immediate goal of this initiative is to stabilize housing. The government hopes to see a positive effect on the economy in the long term. Borrowers must also recognize the long term effects of buying into the revised plan. Homeowners must be able to afford the payments with the new adjustments.

Mortgage rates have not yet fallen to 5% but are at a comfortably low rate. To benefit from refinancing, borrowers generally need to see a percentage point difference between their present rate and the market rate. The new program has an extended reach and expanded benefits. In order to achieve its maximum benefit, however, the program has to work for individuals on a personal level.

The expanded program is focused on moving the economy forward in a positive direction. Borrowers can get into motion under the expanded program - whether they are "underwater" or "upside down" with their mortgages. Homeowners can possibly get above water and get their feet firmly planted on the ground with this refinancing rescue.

I will reply in more depth tomorrow but did you know 105 was a lender ltv limit? Fannie and Freddy allowed 110.

I am not so sure you will see to many lenders doing 125. I am on my phone. Sorry but I had to point that out. TThanks for posting this. Good topic to discuss.

We already started doing 125% LTV refinance loans, no limit on CLTV. Rates are in low 5's now. We are licensed in California.

The loans would have to be owned by Fannie Mae or Freddie Mac.