Government Mortgage Refinance Program – Up to 25% Underwater

By Brandon Cornett | 7/31/09
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In the past, we’ve written about the governments Making Home Affordable program and how it can help people refinance their homes when they are upside down / underwater in their mortgage loans. The original requirement was that you could not be upside down by more than 5%, which means your home’s value could not exceed 105% of your loan balance.

Earlier this month, however, the program was updated to be even more lenient. It seems now that you could be upside down / underwater in your mortgage by 25% and still qualify for the government’s refinance program. You still have to apply for refinancing through a regular mortgage lender, as opposed to applying through government channels.

Refinancing When up to 25% Underwater

To verify this update, I visited the Making Home Affordable website and found that the text had indeed been changed. Under the refinance section of the website, it says that you may qualify even if your current loan balance is up to 125% of the home’s value. Here it is verbatim:

You may be eligible if your first mortgage does not exceed 125% of the current market value of your home. For example, if your property is worth $200,000 but you owe $250,000 or less on your first mortgage, you may be eligible. The current value of your property will be determined after you apply to refinance.

This change will obviously affect many homeowners, as a rapid decline in home values has affected millions of people. It will also cause a rise in the number of mortgage refinance applications, which could mean further backlogs in the lending industry.

Under the current guidelines, you cannot be underwater in your mortgage loan by more than 25% to participate in the program. But there are other guidelines as well, and you can find information about those on the Making Home Affordable website.