A state program set up to help Deschutes County homeowners refinance their underwater mortgages is expanding into Crook and Jefferson counties.

Homeowners at risk of foreclosure throughout Central Oregon now have a chance to modify their loans through the Loan Refinancing Assistance Pilot Project. The program uses Hardest Hit Fund money provided in 2010 by the federal government to Oregon and 17 other states saddled by declining home values and rising unemployment rates.

Oregon housing officials launched the loan program last year, specifically for Deschutes and Jackson counties. But they announced the expansion into Crook, Jefferson and Josephine counties this week, said Ben Pray, spokesman for the Oregon Department of Housing and Community Services, which is running the refinance program.

“We’re casting a little bit wider of a net,” Pray said.

They’re also trying to find more qualified homeowners. Just 75 people in Deschutes and Jackson counties have taken advantage of the refinance program. State officials expected that number to be closer to 300 in the two counties.

It has gone underused partly because loans held by two of the country’s largest mortgage owners — Fannie Mae and Freddie Mac — don’t qualify. That makes a large number of homeowners who could otherwise enroll in the program ineligible, Pray said.

But homeowners who qualified have received average principal reductions of $103,000 on their mortgages, Pray said.

The loan refinance program lets homeowners who owe more on their mortgages than their homes are worth get out from under the mortgage by conducting what’s essentially a short sale. They sell their homes to a Portland real estate company, Further Development, which contracts with the state to help the homeowners refinance. Further Development immediately sells the home back to the owner with a mortgage at its reduced market value.

“It’s an opportunity to satisfy the bank, and the homeowner has a chance to use these Hardest Hit Funds,” Pray said.

The idea is for distressed homeowners to get back on strong enough footing to eventually refinance on their own. The unused state refinance funds could then be used to help additional homeowners.

Foreclosures have remained a persistent drag on the housing markets in Crook and Jefferson counties. Between 2009 and 2012, 46 percent of all Jefferson County home sales have been foreclosure properties, compared with 44 percent in Crook County, according to Central Oregon Association of Realtors data.

Loan Refinancing Assistance Pilot Project

To be eligible for the state’s mortgage refinancing program, a resident of Deschutes, Crook or Jefferson counties must be facing financial hardship, such as a loss of income, and must owe more on his or her mortgage than the property’s current value — but still have the ability to make payments on a lower-priced mortgage.

There are other criteria as well, and not all lenders are participating.

To get information about this and other state housing assistance programs, visit the Oregon Homeownership Stabilization Initiative website, www.oregonhomeownerhelp.org.