HARP Refinances Doubled in 2012
The Home Affordable Refinance Program (HARP) topped 2 million mortgages refinanced in November, with half of those coming in just the past year after new guidelines were adopted.
Nearly 1 million low- and negative equity mortgages were refinanced from January through November under the program, which had struggled to live up to expectations since its launch in spring 2009. New rules adopted in late 2011 made the program more attractive to lenders, who began to approve more refinance applications as a result.
The 130,000 mortgages refinanced through HARP in November were the second-highest total in the program’s history, trailing only the 137,000 refinanced in June 2012. HARP accounted for nearly one-quarter of the total dollar volume of home loans refinanced during November.
Big increase in underwater refinancing
Among the biggest beneficiaries of the new guidelines have been homeowners who are underwater on their mortgages. Over 40 percent of HARP refinances in 2012 were classified as underwater mortgages, compared to less than 10 percent during the first two-and-a-half years of the program.
Furthermore, 24 percent of those who refinanced through HARP in November were underwater on their mortgages by at least 25 percent of their home value (125 percent loan-to-value ratio). Prior to 2012, HARP guidelines did not permit refinancing mortgages that far underwater.
Not surprisingly, HARP refinances are most heavily utilized in states that saw the greatest impact from the downturn in the housing market. HARP accounted for 68 percent of all mortgages refinanced in Nevada during November, 56 percent in Florida and 47 percent in Arizona. In those states, two-thirds or more of all HARP refinances were for underwater loans.
New rules cut fees, protected lenders
Prior to the adoption of the new guidelines, the vast majority of mortgages refinanced through HARP were classified as low equity, with loan-to-value ratios of 80 percent or greater (less than 20 percent equity). The new guidelines gave lenders certain exemptions from financial liability, making them more willing to take on such loans, eliminated some fees for borrowers and removed the 125 percent loan-to-value cap, opening the program up to homeowners who were deeply underwater.
Since its inception, HARP has been available only for mortgages that are backed by Fannie Mae or Freddie Mac. President Obama has proposed expanding the program to other borrowers, but it’s not clear whether he will get the necessary support from Republicans who would prefer to limit government involvement in the mortgage and housing markets.
