Freddie Mac to do away with fee for deeply underwater loan refinancing

In the latest bid to help homeowners hit by the housing crash, Freddie Mac, the U.S.-supported mortgage giant, is set to drop a fee associated with refinancing deeply underwater loans, The Wall Street Journal reports. The firm plans to eliminate a fee of 0.5 percentage points, called a “cash adjustor,” on loans refinanced under the Home Affordable Refinance Program with balances greater than 125% of the property’s value, says Paul Mullings, a senior vice president at Freddie Mac. He spoke at a Mortgage Bankers Association conference on Monday. Dropping the fee represents the latest sign that the government-sponsored enterprises and their regulator are determined to extend the reach of the refinancing program. Changes last year eliminated the loan-to-value cap and relieved banks of some liabilities that could arise with homeowners willing to default. Freddie Mac had earlier this year dropped the cash adjustor on HARP refinancings for mortgages with loan-to-value ratios ranging from 105% through 125%, and encouraged the lenders to pass the savings to consumers. Mullings expects the change should increase the number of borrowers who tap the program, which was revised last year to boost participation. Already this year, refinancings under HARP are increasing as a percentage of loans refinanced by Freddie Mac, he says.