New loan rules will allow more homeowners to refinance mortgages

The Obama administration eased eligibility rules Wednesday for its Home Affordable Refinance Program, lifting the maximum loan-to-value ratio to 125 percent from 105 percent.

The shift, which regulators had hinted was coming, is aimed at making refinancing available to more people whose homes are worth less than their mortgages.

HARP is open to homeowners whose loans are owned or guaranteed by Fannie Mae or Freddie Mac, the mortgage finance giants now under government control. It covers first mortgages only.

The refinance program, launched this year, has gotten off to a slow start, in part because the maximum 105 percent loan-to-value ratio was too low to include many homes that have fallen sharply in value.

Treasury Secretary Timothy F. Geithner said the move was "a crucial step in our broader efforts to get America's housing market and economy on the path to recovery."

Refinance activity in general remains vexed by the jump in mortgage rates from their generational lows in April. Refi applications to lenders have tumbled since mid May as rates have surged, according to the Mortgage Bankers Association. Despite a down tick in rates in the past two weeks, refi activity hasn't rebounded.