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.

"When we 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 estimates."

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.

In 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.