HARP is an acronym, which stands for, the Home Affordable Refinance Program. The federal government program came to be in March 2009 in an effort to provide assistance to approximately 5 million homeowners holding underwater mortgages.
HARP guidelines continue to change so that the needs of troubled borrowers can be met. Housingwire’s Kerri Ann Panchuk reported in late July of alterations that should allow even more underwater homeowners to reap the benefits of the program. Under Freddie Mac, those borrowers holding loan-to-value ratios that fall under 80% will be offered the same access guidelines for both HARP and the agency’s Relief Refinance Mortgage. This will also hold true for HARP 2.0, which was tweaked in October 2011.
The LTV is one of the predominant risk factors that lenders examine when reviewing mortgage applicants. Ratios under 80% have long been considered a safer bet and those borrowers have been able to take advantage of lower mortgage rates. After the mortgage crisis, however, thousands were left with underwater mortgages. That is why the recent change has come about, because prior program participants that hoped to secure a HARP refinance were required to have an LTV ratio of 80% or above, now even those that were considered lower risk borrowers are eligible.
Lender feedback is what resulted in the more lenient guidelines. Mid-September is when all of the modifications should be in place. The plan is for lenders to begin working with applicants and have financing secured by the beginning of 2013. The eligibility guidelines for Freddie Mac’s Relief Refinance-Open Access program are also under review. Currently, lenders approved for the GSE to provide Open Access mortgage refinancing are operating at full capacity. Freddie Mac is working to increase their scope of service.
Freddie Mac’s senor vice president and interim head of single-family loans, Paul Mullings is hopeful about what lies ahead. When asked about the new approach, he said, “Once implemented, the changes will give lenders a new measure of certainty and ease when they help borrowers with Freddie Mac owned or guaranteed mortgages take advantage of today’s historically low mortgage rates.”
He went on to add, “”This will help us build on the success of the HARP 2.0 and Relief Refinance Mortgage programs of helping more than 1.3 million Freddie Mac borrowers.”
How Has HARP Been Performing?
By the end of August 2010, only 894,000 had taken advantage of HARP. It was revamped with the intention of reaching more underwater homeowners and the new program-HARP 2.0, went in to effect in December 2011. In late July, Inman News reported on the HARP program’s progress since.
With historically low mortgage rates remaining, the number of those seeking refinancing through HARP more than doubled by May. The Federal Housing Finance Agency-FHFA, credits the Fall 2011 program changes for the increased participation. The 125 percent loan-to-value or LTV cap on all HARP refinancing mortgages was lifted. Lenders who signed off on refinancing loans tied to legal liabilities linked to the original loan were also forgiven.
Another change in the HARP guidelines did away with several risk-based fees. For example, those where fees charged to homeowners who refinanced into shorter-term mortgages were relieved of conditions of negative equity.
The FHFA reported that in May, there was a year-over-year increase of 41,981 applicants for the government sponsored refinancing program. Of those, more than two thirds were to borrowers with loan-to-values (LTVs) of 80 to 105 percent. According to the FHFA this can be interpreted that those borrowers, “either had equity in their homes or were only slightly underwater.” The report went on to note that close to one third of the HARP recipients were above the 105 LTV mark, which means they are holding mortgages deemed underwater.
The findings showed that foreclosure-heavy states were responsible for 42 percent of the HARP applications. Underwater borrowers in Arizona, California, Florida, Idaho, and Nevada sought help in May.