Homeowners taking part in the Obama administration's housing rescue program through Fannie Mae and Freddie Mac will now be eligible even if their loan-to-value ratio is up to 125 percent. That means they can have up to 25 percent negative equity and still get a refinance.

The rule changes, part of the government's attempts to restore housing affordability and stem the foreclosure crisis, apply to loans backed up by Fannie Mae and Freddie Mac.

Previously, homeowners could borrow up to 105 percent of their home's value. The new loan-to-value ratio is set up at 125 percent in a further effort to address those mortgage holders who owe more than their homes are worth.

"By expanding refinance eligibility, we can bring relief to more struggling homeowners more quickly,'' Treasury Secretary Timothy Geithner said in a statement.

The government earlier this year enacted the Home Affordable Refinance standards in response to the rash of defaults and foreclosures that have occurred as national housing prices have plummeted.

The new LTV rate will be offered only to borrowers who are current on their mortgages that are owned by either Fannie or Freddie.

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