Bailed out US insurer American International Group (AIG) is creating hassels to prevent attempts by US homeowners to refinance their government-backed mortgages.

AIG is reluctant to automatically waive its right to pursue lenders for misrepresenting the quality of loans that may default, as reported by Financial Times.

Due to the apathy of the underwriter, refinancing of AIG insured loans has become difficult to realize.

Under the Home Affordable Refinance Program, or Harp, the US government aims to increase refinancing at a time of record low borrowing rates.

The US government which has 61% stake in AIG, has developed Harp, to enhance refinancing of government-backed mortgages for homeowners with little to no equity.

According to industry sources, an AIG subsidiary, United Guaranty, which sells mortgage insurance to lenders, is weakening efforts by the US government and US-controlled mortgage financiers Fannie Mae and Freddie Mac.

A US Senator Barbara Boxer told Financial Times, "With so many families struggling to make ends meet, it is unacceptable that United Guaranty continues to limit the ability of its customers to refinance at today’s record low rates."

United Guaranty has refinanced approximately 27,000 mortgages insured by the company itself, under Harp since it was launched in mid-2009, the lowest number among the top five US mortgage insurers.