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Increased Flexibility Helps HARP 2.0 Stay On Track, But Low Rates do the Heavy Lifting
The Home Affordable Refinance Programrn(HARP) hit what its sponsoring agency considered a milestone in July, with arntotal of 519,000 loans refinanced through the program since the beginning ofrnthe year. The Federal Housing FinancernAgency (FHFA) released its July Refinance Report on Friday and said that therncontinued high level of HARP loans was due to a combination of record-low interestrnrates and the enhancements announced to HARP last year.</p
Freddie Mac and Fannie Mae refinanced arntotal of 356,091 loans in July and 2,525,853 since the first of the year a pacernwell ahead of 2011 when the two government sponsored enterprises (GSEs)rnrefinanced a total of 3,229,066 during the entire year. The combined number of HARP loans financed byrnFreddie and Fannie during July was 96,370 or just over 27 percent of all ofrntheir refinances that month. HARP loans have represented 20.6 percent of loansrnso far this year, a share that has increased steadily since January. The half-million plus HARP loans thus far inrn2012 have outstripped the 400,024 loans refinanced through the program in allrnof 2011 before enhancements were announced. rn</p
The enhancements to HARP (so-called HARPrn2.0) announced last fall eliminated the existing 125 percent loan-to-valuernratio ceiling, reduced certain risk-based fees for some borrowers andrneliminated them for others, waived some of the representations and warrantiesrnrequired of lenders, and eliminated the need for a new property appraisal inrncertain cases. Prior to these changesrnfewer than one million borrowers had taken advantage of HARP since itsrninception in 2009.</p
Most of the refinancing metrics were downrnfrom June. Total refinancing dropped</bfrom 382,539 loans and HARP loans from 125,866. rnThere were about 30,000 loans with LTVs above 105 percent in Julyrncompared to about 80,000 in June. June,rnhowever, had unusually high numbers. ThernJune HARP total was almost double that of May and could have been an anomaly drivenrnby a 33 percent increase in loans with LTVs between 105 and 125 percent and arnnear 19-fold jump in those with LTV's over 125 percent as those loans began tornbe bundled into securities and sold.</p
“When wernannounced additional program changes to HARP last fall, we were cautiouslyrnoptimistic that the changes would double or more the number of HARP refinances,”rnsaid Acting Director Edward J. DeMarco. “With more than half-a-millionrnhomeowners taking advantage of the program in the first seven months of thisrnyear Fannie Mae and Freddie Mac are on track to meet or surpass our originalrnestimates.” </p
In July 20rnpercent of underwater borrowers chose shorter-term 15 and 20 year mortgages</bwhich help build equity faster but also made the borrower eligible for completernelimination of some of the risk-based loan fees.</p
InrnJuly, HARP refinances represented nearly 60 percent or more of total refinancesrnin states hard-hit by the housing downturn – Nevada, Arizona and Floridarn-compared with 27 percent of total refinances nationwide and loans with LTVsrnover 105 percent represented more than 70 percent of that volume.
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Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.
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