The government announced yesterday that it would be extending its Home Affordable Refinance Program (HARP) that was scheduled to end on June 10 this year. The program, which was started to help troubled borrowers with little or no equity in their homes, will now continue till June 30, 2011. 

HARP initially had a goal of helping around four to five million homeowners with loans owned or guaranteed by Fannie Mae or Freddie Mac to refinance and lower their monthly mortgage payments. According to the Treasury Department, so far, the program has helped around 220,000 homeowners. 

While banks usually require homeowners to have at least 20% equity to qualify for refinancing, this proved to be a problem during the current crisis, where homeowners have been faced with falling home prices. HARP was created to help these borrowers whose home values have fallen and who owe more than their homes are worth by taking advantage of the lower mortgage rates and refinancing their homes. 

Earlier, the program targeted borrowers who owe slightly more than their property values. Later, it was expanded to include those with loan balances of up to 25% more than their home values. 

So far, the program has struggled to meet its goals. The program is limited in reach since it only includes loans backed by the federal mortgage agencies, Fannie Mae and Freddie Mac. Homeowners with second mortgages or private mortgage insurance cannot qualify for refinancing and very often, the closing costs and refinancing expenses are not worth the lower interest rates.