Jann Swanson, Inman News, Jul 16 2012, link
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 originally anticipated.
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.