A U.S. regulator is starting a campaign to encourage as many as 2 million borrowers with mortgages backed by Fannie Mae and Freddie Mac to refinance with a government program for properties that have lost value.
Officials at the Federal Housing Finance Agency convened focus groups this year to find out why borrowers paying interest rates as high as 7% hadn’t yet tried to lower their monthly payments through the Home Affordable Refinance Program. They found many didn’t realize they were eligible.
“There’s a perception among some that you’ve got to be delinquent in order to have some government-sponsored program that can help you,” Edward DeMarco, acting director of the FHFA, said in an interview. “What we want to do is correct that misperception.”
The effort, which starts today, could help boost the flagging refinancing boom in the U.S. Applications have fallen 65% after interest rates rose more than a percentage point since May, according to the Mortgage Bankers Association. HARP applications, which account for 40% of all refinance activity, fell 54% in the same period, according to the association.
Depending on interest rates and home prices, the FHFA estimates that there are between 1 and 2 million borrowers eligible for HARP who are paying above-market interest rates and who have little or no equity in their homes.
The average rate on a 30-year home loan was 4.5% last week, a five-week low, according to
To refinance through HARP, borrowers must be current on their loan payments and have Freddie Mac- or Fannie Mae-backed mortgages that were originated before June 1, 2009. Borrowers also can’t have more than 20 percent equity in their homes. The program ends in December 2015.
The marketing campaign relies largely on social media and other free exposure. FHFA signed up celebrity Realtor Mike Aubrey, host of the HGTV show “Power Broker,” to record public-service announcements that will air in nine cities with the steepest home-price declines during the housing collapse, including Miami, Cleveland and Atlanta. The agency also is providing promotional materials to lenders.
“These are people who are making payments on their houses, and I can assure you they will get better deals even with rates rising,” Aubrey said in an interview. “Is there going to be some point of no return? Absolutely, and that’s one of the reasons there’s a sense of urgency to do it right now.”
About 2.7 million borrowers already have participated in HARP. Refinances through the program doubled in 2012 after officials extended it to borrowers whose mortgages were more than 25% higher than the value of their properties.
The FHFA’s focus groups found many people don’t know about the policy change.
“Some folks may have tried before and found themselves not eligible and may not have realized that the eligibility standards have changed,” DeMarco said.
Other cities targeted for the marketing campaign are Chicago, Detroit, Las Vegas, Tampa and Orlando, Fla., and Riverside, Calif.
