HARP, which launched in March 2009, helped 838,000 Fannie Mae and Freddie Mac borrowers with loan-to-value ratios between 80% and 125% refinance. But roughly 7% of those held LTVs above 105%.
In order to assist more of the estimated 11 million borrowers who owe more on their mortgage than their home is worth, the FHFA removed the 125% LTV ceiling on the program.
Underwater borrowers can't qualify for new loans or refinancings even if they are current on payments. And many would-be buyers are sitting on their hands, spooked by the high numbers of foreclosures and vast tracts of vacant homes.
In the meantime, banks are stepping up efforts to foreclose on borrowers in default. In the three months that ended Sept. 30, notices of default, the first formal step in the foreclosure process, jumped nearly 26% from the previous quarter, according to DataQuick, a San Diego real estate information service.
Even with this plan there still will be a large shadow inventory out there
And even with changes, the program won't do anything for the 3.5 million homeowners who are at least 120 days late on their payments or in default.
The administration is working on another plan that could convert a large number of vacant homes to rental properties. The effort, floated by Fed officials and people in the housing industry, could reduce the number of empty houses that are blighting communities.
Read it allWith demand for rental housing relatively strong, small investors have been buying foreclosures and other homes to turn them into rentals. But Fed Gov. Elizabeth Duke said at a recent forum that large-scale conversions haven't happened because it's expensive to manage single-family home rentals and that the standard practice for the government and the industry has been to prepare vacant properties for sale to new homeowners.