Increased Flexibility Helps HARP 2.0 Stay On Track, But Low Rates do the Heavy Lifting
The Home Affordable Refinance Program
(HARP) hit what its sponsoring agency considered a milestone in July, with a
total of 519,000 loans refinanced through the program since the beginning of
the year. The Federal Housing Finance
Agency (FHFA) released its July Refinance Report on Friday and said that the
continued high level of HARP loans was due to a combination of record-low interest
rates and the enhancements announced to HARP last year.
Freddie Mac and Fannie Mae refinanced a
total of 356,091 loans in July and 2,525,853 since the first of the year a pace
well ahead of 2011 when the two government sponsored enterprises (GSEs)
refinanced a total of 3,229,066 during the entire year. The combined number of HARP loans financed by
Freddie and Fannie during July was 96,370 or just over 27 percent of all of
their refinances that month. HARP loans have represented 20.6 percent of loans
so far this year, a share that has increased steadily since January. The half-million plus HARP loans thus far in
2012 have outstripped the 400,024 loans refinanced through the program in all
of 2011 before enhancements were announced.
The enhancements to HARP (so-called HARP
2.0) announced last fall eliminated the existing 125 percent loan-to-value
ratio ceiling, reduced certain risk-based fees for some borrowers and
eliminated them for others, waived some of the representations and warranties
required of lenders, and eliminated the need for a new property appraisal in
certain cases. Prior to these changes
fewer than one million borrowers had taken advantage of HARP since its
inception in 2009.
Most of the refinancing metrics were down
from June. Total refinancing dropped
from 382,539 loans and HARP loans from 125,866.
There were about 30,000 loans with LTVs above 105 percent in July
compared to about 80,000 in June. June,
however, had unusually high numbers. The
June HARP total was almost double that of May and could have been an anomaly driven
by a 33 percent increase in loans with LTVs between 105 and 125 percent and a
near 19-fold jump in those with LTV's over 125 percent as those loans began to
be bundled into securities and sold.
announced additional program changes to HARP last fall, we were cautiously
optimistic that the changes would double or more the number of HARP refinances,"
said Acting Director Edward J. DeMarco. "With more than half-a-million
homeowners taking advantage of the program in the first seven months of this
year Fannie Mae and Freddie Mac are on track to meet or surpass our original
In July 20
percent of underwater borrowers chose shorter-term 15 and 20 year mortgages
which help build equity faster but also made the borrower eligible for complete
elimination of some of the risk-based loan fees.
July, HARP refinances represented nearly 60 percent or more of total refinances
in states hard-hit by the housing downturn - Nevada, Arizona and Florida
-compared with 27 percent of total refinances nationwide and loans with LTVs
over 105 percent represented more than 70 percent of that volume.