Homeowners who hope to refinance existing mortgages that are "underwater" just got a reprieve that will allow them another year to do so.  The Federal Home Financing Agency announced Monday that its Home Affordable Refinance Program (HARP), which was originally set to expire on June 30, 2010, will be extended to June 30, 2011.

HARP, part of the Making Home Affordable Program, is designed to expand access to refinancing for otherwise qualified borrowers who cannot move into more affordable mortgages because of a lack of equity in their homes.  Unlike other homeownership assistance programs, HARP guidelines are designed for borrowers who are current on their mortgages.  The program was originally designed to help homeowners with a loan-to-value (LTV) ratio up to 105 percent including those with some equity but not enough to refinance without private mortgage insurance.  Last October that LTV figure was revised upward to 125 percent.

Acting FHFA Director Ed DeMarco said that "FHFA has reviewed the current market situation and the state of mortgage insurance availability and has determined that the market conditions that necessitated the actions taken last year have not materially changed.  Accordingly, to support and promote market stability, and to encourage lenders and other mortgage market participants to fully adopt the HARP program...FHFA is authorizing the extension of HARP until June 30, 2011."

The extension of the HARP comes less than a week after President Obama announced his administration would infuse $1.5 billion in stimulus funds into state housing finance agencies in states that have suffered a dramatic drop in housing prices coupled with higher than average unemployment.  The funds, under the moniker 4HM for Help for the Hardest-Hit Housing Markets, will be used to help unemployed homeowners avoid foreclosure and for refinancing homes where the homeowner no longer has equity. A major concern during the housing downturn has been the potential of massive numbers of homeowners walking away from homes in which they no longer have a financial interest.

In 2009, Fannie Mae and Freddie Mac purchased or guaranteed more than 4 million refinanced mortgages.  Of these, 190,180 were HARP refinances with LTVs between 80 percent and 125 percent.