HARP Refinancing: Nearly Half of Borrowers at 105% Loan-to-Value or Higher

HARP Refinancing: Nearly Half of Borrowers at 105% Loan-to-Value or HigherThe regulator over Fannie Mae and Freddie Mac said that HARP refinancing has gone so well over the past year that the two government-subsidized companies will soon kick off a nationwide public relations campaign to educate more “underwater” borrowers.
Edward DeMarco, acting director of the Federal Housing Finance Agency, did not give a specific launch date for the campaign, but a lack of a current promotion hasn’t hurt HARP (Home Affordable Refinance Program).
The program’s share of refinance applications increased to 31 percent from 30 percent last week, even as refinancing applications overall dipped as a result of slightly higher interest rates.
HARP refinances for borrowers deeply underwater, owing much more on mortgages than the value of their home, is fueling the program’s growth. Borrowers with 105 percent loan-to-value ratios or greater made up 43 percent of total HARP transactions in 2012, compared to 15 percent in 2011.
HARP transactions into a shorter-term mortgage made up 18 percent of total HARP activity in 2012 for underwater borrowers, compared to 10 percent in 2011.
The Obama Administration’s program to help homeowners avoid foreclosure took off in popularity in the Spring of last year after the program was overhauled to attract more lenders and expand eligibility among borrowers whose mortgages are held by Fannie and Freddie. The two entities own or guarantee more than 60 percent of U.S. mortgages.
Those changes included: expanding the program to greater than 125 loan-to-value ratio; clarifying representation and warranty exposure; and providing incentives for shorter-term refinance opportunities through reduced pricing.
The result: HARP reached 1.1 million borrowers last year, doubling the number of transactions over the previous three years. HARP launched in early 2009.
DeMarco spoke briefly about HARP’s success in prepared testimony Tuesday for a hearing on the future of Fannie and Freddie before the U.S. House Committee on Financial Services.
“We look forward to building on those successes in 2013,” DeMarco said. “We soon will be implementing a nationwide public relations campaign to educate consumers about the HARP program and the eligibility requirements.”

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