Banks routinely require homeowners to have a substantial amount of equity in their homes -- at least 20% -- to refinance.

That has been an insurmountable problem for many people who desperately need to get out of an adjustable-rate loan but can't because home values have fallen so much over the last couple of years.

Home Affordable Refinance, which is part of President Obama's Making Home Affordable foreclosure prevention program, should help.

It began by allowing homeowners to refinance a first mortgage worth up to 105% of the current market value of the property.

But too many borrowers couldn't qualify. In July, the White House raised the limit to 125% of the appraised price.

That's the case even if you have a second mortgage of some kind that puts you even further upside down on your home.

It means homeowners who owe more than 125% of their home's value will be able to qualify for the program even if that debt is split between two or more loans.

Let's say your home is currently worth $300,000 and you owe $375,000 on your first mortgage. You can borrow up to $375,000 to repay and refinance your first loan.

You can do that even if you have a second mortgage for $40,000, putting your total mortgage debt at $415,000, or 138% of the value of the home.

Many second mortgage holders have blocked that kind of refinancing over the past year. But after Washington spent billions to bail out the banking industry, it can demand more cooperation with the Home Affordable program.

Your new loan will charge the prevailing interest rate for a 30-year, fixed-rate mortgage, which is 5% to 5.5% for borrowers with average or better credit.

Whether you can shop around will depend on who owns or backs your loan.

If it's Freddie Mac, you will have to refinance through your current mortgage company. That's because Freddie is structuring the program more like a modification than a refinancing and is waiving most fees.

If it's Fannie Mae, you can choose among lenders approved by Fannie, so you should shop around for the lowest rate and fees.

Both Fannie and Freddie are going easy on requirements for minimum credit scores, and both are suspending their normal requirements for buyers to have private mortgage insurance if they have less than 20% equity.

One way in which this isn't like your typical refinancing: You can't take out cash from the refinancing.

To qualify, you must be current on your mortgage, meaning no payments were more than 30 days late in the past year. And you must be able to document that you have enough income to support the new payments.

You do not have to live in the house. This is the first government program that will help you refinance vacation and investment properties.

If you don't qualify for this plan, the Home Affordable Modification program might work for you instead.

To get your refinancing started, just call your lender and say you want to take part.

If you have further questions, go to the government's new Web site, MakingHomeAffordable.gov.

By Mary Yanni

Interest.com Contributing Editor