The Obama administration on Wednesday moved to allow more underwater borrowers to take advantage of lower interest rates under its program to combat the foreclosure crisis.

Strapped borrowers with mortgages worth up to 125% of their home's value will now be eligible to refinance under the program, as long as they are current on their loans. Currently, the program caps eligibility at 105% loan-to-value.

Department of Housing and Urban Development Secretary Shaun Donovan made the announcement while touring a foreclosure-ridden neighborhood of Las Vegas, Nev., with Senate Majority Leader Harry Reid, D-Nev., and Congresswoman Dina Titus, D-Nev.

"By expanding refinance eligibility, we can bring relief to more struggling homeowners more quickly. It's a crucial step in our broader efforts to get America's housing market and economy on the path to recovery," Treasury Secretary Timothy Geithner said in a statement.

The program, one prong of the administration's effort to help strapped borrowers, is targeted at underwater borrowers with mortgages backed by Fannie Mae (FNM) and Freddie Mac (FRE).

Normally, the mortgage finance giants require mortgage insurance for loans greater than 80% of the home's value. But under the program, borrowers with mortgages worth 80% to 125% of their home's value can refinance without having to purchase mortgage insurance.

In a recent speech, James B. Lockhart, the regulator for Fannie Mae and Freddie Mac, said that 80,000 people had already refinanced under the program.

However, rising rates could hamper the program's reach. Refinancing volume has dropped off sharply since April, when the average rate on a 30-year fixed-rate mortgage hit 4.78%, according to Freddie Mac (FRE)'s weekly survey of its lenders. The average rate on a 30-year mortgage was 5.42% last week.

-By Jessica Holzer, Dow Jones Newswires; 202-862-9228; jessica.holzer@dowjones.com