HARP 2.0: 500K Applications; 60% Projected Approvals

The Obama Administration’s revamped Home Affordable Refinance Program, so-called HARP 2.0, has drawn applications for refinancing from half a million households since its reboot earlier this year, according to U.S. housing officials.
But new survey results by the Federal Reserve taken from 58 U.S. banks show that lender participation and expectations are “moderate” for HARP 2.0 refinancing of “underwater” mortgages.
Only a third of the banks reported they were actively pursuing HARP 2.0 customers. And of those, a majority anticipated a 60 percent approval rate.
Nonetheless, the enhanced HARP has been highly touted as one of the administration’s new tools for easing the foreclosure crisis.
“With fewer borrowers falling behind on their mortgages and almost half a million families taking advantage of our enhanced Home Affordable Refinance Program – standing to save on average $2,500 per year – it’s clear that the Administration’s efforts continue to provide significant positive benefits,” said Raphael Bostic, assistant secretary for Housing and Urban Development (HUD), in a statement yesterday on the administration’s April “housing scorecard” update.
Under the original HARP, lenders completed more than 1.1 million refinances on mortgages owned or guaranteed by Freddie Mac or Fannie Mae since the program’s launch in 2009. But only slightly more than 110,000 affected underwater borrowers with loan-to-value (LTV) ratios above 105 percent.
The focus of the expanded HARP 2.0 is homeowners current on their payments, but who owe much more on their mortgages than their homes are worth. The new HARP eliminates the LTV ceiling, reduces certain risk-based guarantee fees, and extends the program’s end date to December 2013.
About one-third of banks reported that they were “actively soliciting HARP 2.0 applications,” the Fed reported in its Senior Loan Officer Opinion Survey for April.
And a majority of those participating said they anticipated that 60 percent or more of such applications would be approved and successfully completed.
The bank respondents reported these factors that reduced their willingness or ability to offer HARP 2.0 loans:

  • The risk that the Fannie Mae and Freddie Mac might put back the mortgage;
  • Difficulty in obtaining transfers of existing private mortgage insurance coverage;
  • Difficulty in identifying junior lien holders, or difficulty in obtaining re-subordination of a known second lien.

HARP 2.0 was announced late last year, but become operational last month after federal loan processing systems were updated to accommodate the reboot of the program.

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