* 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)
By Margaret Chadbourn
WASHINGTON, Sept 9 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
"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
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
"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)