The Home Affordable Refinance Program (HARP) has been extended for two years beyond its scheduled expiration on December 31. The Federal Housing Finance Agency (FHFA) announced the extension today saying it had determined the extension will provide borrowers with additional opportunities to refinance, give clear guidance to lenders, and reduce losses for Fannie Mae, Freddie Mac and taxpayers.
HARP is designed specifically for current homeowners with mortgages owned or guaranteed by Freddie Mac or Fannie Mae (the GSEs) and high loan-to-value (LTV) ratios which make it difficult if not impossible to refinance through traditional programs. The majority of HARP borrowers are actually underwater on their mortgages with the majority having LTVs in excess of 105 percent.
The program, which will now expire on December 31, 2015, has assisted more than 2.2 million borrowers to refinance since its inception in April 2009, however nearly half of those homeowners have accessed the program in the last 15 months. Loans through the program were originally capped at an LTV of 105 percent which was raised to 125 percent fairly early in the program's existence but it still did not assist as many homeowners as had been anticipated. In the fall of 2011 several revisions to the program were instituted including elimination of any cap on the loan-to-value of the resulting loan. Since then use of the program has skyrocketed and HARP loans have represented around one quarter of GSE refinancing for most of 2012.
"More than 2 million homeowners have refinanced through HARP, proving it a useful tool for reducing risk," said FHFA Acting Director Edward J. DeMarco. "We are extending the program so more underwater borrowers can benefit from lower interest rates."
FHFA, which is conservator of the GSEs, plans to launch a nationwide campaign to educate consumers about HARP and its eligibility requirements and motivate them to explore their options and utilize HARP before the program ends. FHFA said it could not provide hard estimates of how many additional homeowners might be eligible for the program.
To qualify for a HARP refinance a homeowner must be current or have had no more than one late payment in the previous year on a loan that was sold to one of the GSEs prior to May 2009. The current LTV of the loan must be greater than 80 percent.