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Earlier this week, the Obama administration and The Federal Housing Finance Agency (FHFA), along with Fannie Mae and Freddie Mac, announced a series of changes to the Home Affordable Refinance Program (HARP) in an effort to attract more eligible borrowers who could benefit from refinancing their mortgage.

Over the past two years, FHFA has identified several changes that would make HARP accessible to more borrowers whose mortgages are owned or guaranteed by Fannie or Freddie (often referred to as "the Enterprises"). In addition to creating more refinancing opportunities, the government's big-picture goal with these changes is to add more stability to the housing market.

What makes HARP unique is that it is the only refinance program available to borrowers who currently owe more than their home is worth—aka, "underwater" homeowners. The program hopes to help these homeowners stay in their homes by taking advantage of low interest rates to lower their monthly payments. HARP is available to borrowers with loans sold to Fannie and Freddie on or before May 31, 2009 with current loan-to-value (LTV) ratios above 80%.

This week's enhancements to HARP include the following:

• Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers
  
• Removing the current 125% LTV ceiling for fixed-rate mortgages backed by Fannie and Freddie
  
• Waiving certain representations and warranties that lenders commit to in making loans owned or guaranteed by Fannie Mae and Freddie Mac
  
• Eliminating the need for a new property appraisal where there is a reliable AVM (automated valuation model) estimate provided by Fannie and Freddie
  
• Extending the end date for HARP until Dec. 31, 2013 for loans originally sold to Fannie and Freddie on or before May 31, 2009

The above changes are designed to encourage borrowers to utilize HARP to refinance into shorter-term mortgages by removing certain risk-based fees. If you owe more on your house than it's currently worth, you might be able to reduce the balance owed by taking advantage of today's low-interest rates and shortening the term of your mortgage.

Details of the HARP changes are expected to be delivered to mortgage lenders and servicers by November 15. Bear in mind that participation is not mandatory, so implementation of these changes will vary from lender to lender. Check with an experienced real estate professional to stay in the loop as these changes unfold.

-Steve Breihan