* Regulator: review of refinancing options "worthwhile"
* Geithner confident can change refinancing programs
* More than 838,000 refinanced government-backed loans
(Updates with average interest rates, estimates from CBO)
WASHINGTON, Sept 9 (Reuters) - The regulator for Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) said on Friday it was considering ways to make it easier for borrowers to refinance their loans, a step President Barack Obama has called for to help the economy.
The Federal Housing Finance Agency, which oversees the two government-controlled mortgage firms, said in a statement it was working with the Obama administration on ways to expand the two-year old Home Affordable Refinance Program (HARP).
The Obama administration introduced HARP in April 2009 as a way to help distressed borrowers with government-backed loans who are current on their payments move into more affordable mortgages. However, it has helped only about 838,000 borrowers, far fewer than the hoped-for 4 million to 5 million.
Obama told Congress on Thursday that an expanded refinancing initiative "would put more than $2,000 a year in a family's pocket and give a lift to an economy still burdened by the drop in housing prices."
While the White House wants to broaden the program, FHFA, which looks out for the financial soundness of taxpayer-supported Fannie Mae and Freddie Mac, made no promises.
"The final outcome of this review remains uncertain but FHFA believes this undertaking is worthwhile and consistent with our conservator responsibilities," it said.
One possible change to HARP would be to allow borrowers to refinance mortgages that exceed the current limit of 125 percent of the value of a borrower's home, the agency said.
Mortgage rates are at record lows, yet many U.S. homeowners have been unable to refinance because they owe more than their homes are worth or have less-than-perfect credit. The average rate on a 30-year fixed loan was 4.12 percent last week, the lowest level in at least six decades, according to Freddie Mac.
FHFA said it was looking at the "frictions" in HARP that had limited the program's effectiveness. Housing experts say up-front costs borrowers are required to pay, which can increase a homeowners' outstanding mortgage principal, are among factors that have curbed the program's reach.
"FHFA is carefully reviewing the mechanics of the HARP program to identify possible enhancements that would reduce barriers for borrowers," the regulator said.
GEITHNER SEES FHFA SUPPORT
For weeks the administration has been hashing out ways to remove existing barriers for borrowers. It wants to cut monthly payments both to provide relief to homeowners who might otherwise default and to free up cash for other spending, which could help the faltering economic recovery.
U.S. Treasury Secretary Timothy Geithner said on Friday that FHFA had the authority to change the HARP program and that the regulator was supportive of changes to reach more borrowers.
"They will support the types of reforms that will make that possible," he told National Public Radio.
The non-partisan Congressional Budget Office has estimated that proposed changes could spur the refinancing of 2.9 million mortgages and provide $7.4 billion in savings for borrowers in the first year of a government program.
It also said defaults prevented by a refinancing plan would save the Federal Housing Administration, Fannie Mae and Freddie about $3.9 billion. Fannie and Freddie, combined with the FHA, support about 90 percent of the mortgage market.
However, holders of mortgage bonds are expected to take a hit as loans on the bonds they hold are paid off early. (Reporting by Margaret Chadbourn)