How Many Have Taken Advantage of the F.H.A. Short Refi Program?

The New York Times reports that, "A government program aimed at helping “underwater” homeowners refinance into more-affordable, reduced-principal loans has captured only a sliver of the borrowers thought to be eligible in the four years since its introduction." Why is that so?

Well for one, lenders were given an option on whether or not to participate, so giants such as Fannie Mae and Freddie Mac bowed out, likely because it means reducing a borrower's principal balance. In addition, existing F.H.A. loans are not eligible, which means less borrower's are able to obtain a reduction in payments.

image Courtesy of the Article

In addition, the Times says the agency is deciding whether or not to continue the program, amidst the low lender participation, yet says that many feel participation would increase "if states covered some of the principal write-downs with their allocations from the Hardest Hit Funds distributed under the Troubled Asset Relief Program, or TARP. At least eight states have expressed interest, but regulatory 'tweaks' are needed to bring the two programs into sync."