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Friday, April 26, 2013

The HARP Success Story

by Calculated Risk on 4/26/2013 09:38:00 PM

From E. Scott Reckard at the LA Times: Federal refi program for underwater homeowners hits its stride

Nearly 1.1 million homeowners with little or no equity were able to refinance last year under HARP, which assists borrowers who are current on their monthly payments. That's nearly as many as in the three previous years combined, and the latest figures show that early this year, the pace of these refis abated only slightly.
"This is a program that has reached a lot of people — probably more underwater homeowners than anybody thought it would," said Guy Cecala, publisher of Inside Mortgage Finance. "It is also one of the few programs that has rewarded people who have stayed current on their mortgages."

The program has been successful because it addressed one of the hangover effects from the housing bust: the millions of Americans stranded in expensive, high-interest-rate loans. These borrowers owed too much on their homes and could not refinance.
The HARP program really took off when most of the representations and warranties associated with the original loans were eliminated (meaning the lenders would not be responsible for defects in the original loans) and after the automated systems were updated in March of 2012. Since these borrowers were current, and Fannie or Freddie already owned the loan, it made sense to allow them to refinance at a lower rate even if they owed more than their homes were worth (this lowered the risk of default for the GSEs). 

The FHFA thought this program would help close to 1 million homeowners - that estimate was too low!