The U.S. Department of the Treasury approved an Oregon pilot program to aid underwater borrowers in Multnomah County (which includes Portland) to refinance their mortgages, HousingWire reported Feb. 19. The program is funded through the Treasury’s Hardest Hit Fund.

The program comes from Sen. Jeff Merkley, D-Oregon, who created the proposal, “The 4% Mortgage: Rebuilding American Homeownership,” to enable underwater homeowners who are current on their mortgage an opportunity to refinance to a lower interest rate.

Oregon will pilot the initiative using $10 million of the $220 million from the Hardest Hit Fund, members at the Oregon Housing and Community Services told HousingWire.

Even though OHCS anticipates that the pilot program only will refinance about 50 homes in Multnomah County, which is the state’s hardest hit county, the program ideally can serve as a template for national programs designed to help homeowners.

Other states supposedly are still in the development phase of their Hardest Hit plans, but Oregon is the first to have launched a program, HousingWire reported.

“The Hardest Hit fund allows states hardest hit by the housing crisis to implement innovative ideas to help struggling families avoid foreclosure,” Treasury said, HousingWire reported. “Through the program, states can directly address the distinct needs of the homeowners struggling in their state.”

The Merkley plan would be along the same lines as the Home Affordable Refinance Program, where 1.8 million borrowers have mortgages secured by both Fannie Mae and Freddie Mac.

“HARP is designed to help homeowners refinance their first mortgages, if their mortgage is government-guaranteed, which by itself excludes half of all American homeowners. HARP also suffers from the complexities involved in first and second mortgages,” Merkley said, HousingWire reported.

“In addition, HARP’s rules give the current mortgage servicer a distinct advantage in issuing the refinanced mortgage.”