Recent changes to HARP mean that some 6.7 million homeowners will be eligible to refinance their mortgage to a lower interest rate under the government-backed program.

That's according to a new analysis by the real estate analytics firm DataQuick. The company estimates that's how many borrowers could potentially benefit from a recent change to the program that allows borrowers to refinance regardless of how far underwater they are on their mortgage.

Limit on underwater refinancing removed

Mortgage servicers are currently implementing several changes to the program, which were announced by the Obama administration last fall. Chief among them is the elimination of a limit on how far underwater a homeowner can be on their mortgage and still qualify for the program.

Previously, the balance on mortgages refinanced through HARP could not exceed 125 percent of the home's current value; the changes announced last fall eliminated that cap entirely. Homeowners must still be current on their mortgage payments to qualify.

More options for borrowers

Other changes to the program were designed to make it easier for homeowners with private mortgage insurance (PMI) to refinance or to obtain a HARP mortgage refinance with a lender other than their current mortgage servicer.

In addition, new limits were placed on the fees lenders could charge up front for refinancing a low-equity or underwater mortgage, known as loan level pricing adjustments. The new rules limit such fees to a one-time charge of 0.75 percent of the loan balance, down from 2.0 percent previously, and completely eliminate such fees on mortgages refinanced into a term of 20 years or less.

Will lenders go along?

Although the new rules have been out for several months, many lenders are still incorporating them into their mortgage refinance programs. Even so, it's not clear how many homeowners will actually benefit. The program is voluntary for lenders, and many homeowners who have applied for a HARP refinance in the past have been turned down despite qualifying under the official guidelines.

That's because even though HARP has its own set of guidelines for which mortgages will be approved for refinancing, lenders have their own guidelines as well, which may be considerably more stringent. As a result, to date only one million homeowners have been able to refinance their mortgages under HARP, compared to a projected 4-5 million when the program was launched in spring 2009.

HARP stands for the Home Affordable Refinance Program, which is designed to enable homeowners with little or no equity to refinance their mortgages to the historically low interest rates that have been available over the past two years.

Published on February 8, 2012