Wednesday, July 25, 2012

HARP 2 Changes Increase Program Market Share

After 2 years and 2 months, the Home Affordable Refinance Program (HARP) is finally making an impact on U.S. homeowners. The FHFA reports that 1 in 5 refinances made through Fannie Mae and Freddie Mac between January - May 2012 used the HARP refinance program.
At 20% of all refinances, this is the largest market share for HARP since the program's March 2009 launch.

HARP 2 Changes Increase Program Market Share

HARP was first launched in March 2009. Its goal was to help 7 million U.S. homeowners get access to the day's low mortgage rates.
HARP's main feature was that it waived mortgage insurance requirements for refinancing homeowners whose current mortgages required no such thing -- even if their home's new valuation pushed them over the 80% limit. With HARP, you could refinance into an LTV over 80% and not pay mortgage insurance.
It's easy to see the program's appeal.
However, the government placed an LTV limit of 125% on all HARP borrowers and, after 2 years, the HARP refinance program was falling well short of its 7 million household target. That's when the government made changes to the "underwater mortgage" program, allowing for unlimited loan-to-value among other changes.
Not surprisingly, beginning with the launch of HARP 2, HARP mortgage applications soared.

FHFA Reviews HARP 2 Statistics

HARP 2 launched in late-2011. Refinance activity has been strong in the months since. Recently, the FHFA released data on this year's first batch of HARP refinances. A few key trends emerge :
  • Freddie Mac handled 45% of HARP refinances but just 35% of all refinances overall, January-May 2012
  • Nevada, Michigan and Arizona have the highest ratio of HARP refinances to all refinances, January-May 2012
  • HARP refinances are 30-year fixed rate mortgages twice as often as they're for 15-year or 20-year terms
Most importantly, though, the removal of the 125% loan-to-value limit doesn't appear to be changing the distribution of closed HARP mortgages.
In May, mortgages with LTV in excess of 125% accounted for just 4.4% of the overall HARP total. The majority of loans are still written in the 80-105% LTV range. This data suggests that, despite looser lending guidelines with the new HARP 2.0 program, mortgage lenders are choosing to keep high-risk loans off their books.
If you've been turned down for HARP because of high LTV, it's likely "lender choice" as opposed to HARP guidelines. Consider applying again with a different mortgage lender. You may get different results.