The changes to the HARP program that
were put in place last fall seem to be having an affect according to data
released this morning by the Federal Housing Finance Agency (FHFA). The Administration made significant "enhancements"
to the Home Affordable Refinance Program administered by FHFA after the
original program launched in 2009 failed to attract the volume of borrowers
HARP 2.0, as the new version of the
program is commonly called, eliminated any eligibility ceiling on loan-to-value
(LTV) ratios and some risk based fees for borrowers who refinanced into
short-term mortgages and reduced fees for other borrowers. The new program also waived some of the
representations and warranties required of lenders, and eliminated the need for
a new property appraisal where a reliable automated valuation model estimate of
value was available.
No doubt aided by record low interest
rates, HARP refinancing has taken off in the last few months. The program was responsible for 20 percent of
all refinancing done during the month of May, the highest percentage in the
history of the program. The number of
completed refinances for underwater borrowers in the first five months of 2012
exceeded the total number of such refinances during the whole of 2011.
As the table below shows, while interest
rates are helping a lot of people refinance, other factors have also impacted
refinancing over the last four years as the market has sought to recover from
the housing meltdown.
In May there were 341,209 properties
refinanced through Fannie Mae and Freddie Mac and 1,787,223 so far in
2012. Fannie Mae was responsible for 68
percent or 230,523 of the May transactions and 65 percent or 1,169,063 of all
2012 refinancing to date while Freddie Mac's refinances totaled 110,686 and
618,160. A total of 67,456 of the May refinances
were done through HARP and 297,103 of those completed so far in 2012. The proportion of HARP loans done through
Freddie Mac relative to Fannie Mae was much higher than for refinances in general
with the smaller GSE accounting for 41 percent of HARP refinances in May and 46
percent of those year-to-date.
While it was the removal of the previous
125 percent LTV ceiling that elicited the most interest when HARP 2.0 was
unveiled, that feature is only a small factor in recent HARP refinances. Only 2,954 or 4.4 percent of May HARP loans
and 11,118 or 3.7 percent of loans so far in 2012 have had loan-to-value ratios
in excess of 125 percent. More than
half, in fact, have had LTV's in the 80 to 105 percent range.
While not a lot of borrowers are taking
advantage of the fee elimination incentives offered for borrowers picking 15
and 20 year mortgage terms 15 percent of borrowers so far this year have chosen
the shorter term alternatives compared to 10 percent in 2010. In May that number spiked to 19 percent.