UPDATE 2-U.S. housing regulator extends popular refinance program

Thu Apr 11, 2013 2:11pm EDT

* Borrowers will have until 2015 to win a new loan

* More than 2.2 million have used Home Affordable Refinance Program

By Margaret Chadbourn

WASHINGTON, April 11 (Reuters) - The top U.S. housing regulator on Thursday extended by two years a popular federal refinancing program to allow more borrowers with government-backed loans to lower their monthly mortgage payments.

The Home Affordable Refinance Program, or HARP, allows borrowers with loans backed by Fannie Mae and Freddie Mac to cut loan payments by refinancing at record low interest rates even if their homes have lost value.

The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, said it would extend the program until the end of 2015. It had been set to expire at the end of this year.

"We are extending the program so more 'underwater' borrowers can benefit from lower interest rates," Edward DeMarco, the acting director of the FHFA, said in a statement. He said that HARP has proven to be a "useful tool for reducing risk."

More than 2.2 million homeowners have used refinanced mortgages through HARP since the Obama administration rolled out the program in 2009. It is viewed as one of the more successful anti-foreclosure programs started by the government in the wake of the housing market's collapse.

The program's extension was expected because of its growing reach and increasing popularity among lenders. Banks can often charge more on HARP loans because borrowers are not always paying traditional fees, including closing costs, to refinance.

The largest banks in the United States, including Wells Fargo, Bank of America and JPMorgan Chase & Co., stand to benefit from the extension, analysts said. HARP pays banks incentives to refinance to qualified borrowers.

Greg McBride, a senior financial analyst at Bankrate.com in North Palm Beach, Florida, said that the program was unlikely to pull in as many borrowers as it had to date, although the number would still be "sizable."

HARP loan volume picked up last year after FHFA made changes in 2011 that made it easier for borrowers to switch to cheaper loans, even if they have little to no equity in their homes.

The regulator scrapped a cap that had prohibited borrowers whose mortgages exceeded 125 percent of their property's value from refinancing loans. It also took steps to coax lenders to participate in the program by removing technical barriers.

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