Three years into a stubborn foreclosure crisis, the Federal Housing Finance Administration (FHFA) said it is considering changes to the government's home refinancing programs to make them available to more consumers

The focus of attention is the administration's Home Affordable Refinance Program (HARP), introduced more than two years ago with the aim of helping homeowners avoid foreclosure by refinancing their mortgages to more affordable terms.

The program covers only mortgages owned or guaranteed by Fannie Mae or Freddie Mac and originated before June 2009. To be eligible, borrowers must be current on their payments and have a current loan-to-value ratio (LTV) between 80 and 125 percent.

An essential element of this program is the allowance to carry forward into the new loan any existing private mortgage insurance from the prior mortgage or, if no mortgage insurance existed, none would be required for the refinanced mortgage.

Less than expected results

As of June 30, 2011, more than 838,000 borrowers had refinanced through the HARP program – many fewer than expected or eligible for the program.

“In the meantime, continued declines in house prices and recent declines in mortgage interest rates to historic low levels suggest that more households could benefit from this program and, importantly, such refinances could reduce the Enterprises' credit risk,” said FHFA acting director Edward DeMarco.

Since the beginning of the mortgage modification efforts, frustrated homeowners have written to, detailing how difficult it is to work with loan servicers to alter the terms of a mortgage. Those complaints still roll in on a daily basis.

Matthew, of Los Angeles, Calif., wrote last week that his duplex is now in foreclosure. He said he began modification efforts with Chase in October 2009.

“In February 2010, Chase said I qualified for HAMP and I was told to make trial payments,” Matthew told “Every payment has been made on time and I continue to send in my payments along with updated paperwork showing the rental unit as part of my income with every package. All the while, Chase adds penalties and late fees while compounding the difference between my loan modification payments and my original payments.”

Crushing blow

Earlier this year, Matthew said he was approved under the HAMP program and promptly sent in his final paperwork. Then came the crushing blow.

“I was told Chase had denied my loan modification since I lived in a duplex,” Matthew said. “I told them that that I always had disclosed it was a duplex and that I had always reported my rental income. In July 2011, Chase requested that I send in more proof that I lived in the duplex --I had already sent in my phone and gas bill. I sent in another utility bill and called again. Chase said my modification had been denied and did not give a reason. On August 31, 2011. I was sent an Acceleration Warning saying I owe $36,242.86.”

While change may, in fact, be in the works it may come too late for Matthew and thousands in his same situation.

“FHFA is carefully reviewing the mechanics of the HARP program to identify possible enhancements that would reduce barriers for borrowers already otherwise eligible to refinance using HARP,” DeMarco said. “If there are frictions associated with the origination of HARP loans that can be eased while still achieving the program's intent of assisting borrowers and reducing credit risk for the Enterprises, we will seek to do so.”

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