HARP performance rising?
According to the Federal Housing Finance Agency (FHFA), the number of homeowners that refinanced under the Home Affordable Refinance Program (HARP) rose slightly in August (the latest month reported). In July, 26,500 homeowners refinanced under the program and in August, the volume rose to 28,900, a nine percent rise, leading some to believe the program is improving in performance.
HARP was designed to help mortgages backed by Fannie Mae or Freddie Mac (whose conservator is the FHFA) and has refinanced 894,000 homeowners since it launched two years ago, far short of the five million mark the agencies originally sought to refinance. The biggest challenge with the HARP program (aside from servicers’ alleged misdeeds) has been how few borrowers could qualify because refinancing loans were limited to 125 percent of a home’s appraised value which is problematic with the number of homes underwater in America.
Last week, President Obama announced his “we can’t wait plan,” introducing the next phase of the Home Affordable Refinance Program (HARP), altering the current program without Congressional approval, saying that “we can’t wait.”
The President’s new executive order
The FHFA has forecast the number of HARP refinances to double by the end of 2013 with the President’s executive order that helps homeowners that are current and owe more on their mortgage than their home is worth to refinance at current rates by eliminating fees, and will begin using an automated valuation model rather than an appraisal. Some are dubbing it an economic stimulus package, theorizing that with homeowners saving hundreds of dollars each month, they will put that money back into the economy in the form of retail and similar spending.
This executive order extends HARP out 18 months to December 31, 2013, but only applies to loans backed by Fannie Mae or Freddie Mac that were taken prior to May 31, 2009. Critics point out that over 3.5 million homeowners are more than four months behind which HARP does not address, and banks complain the risk is too high, red tape too deep, so the President’s new mandate will reduce the liability to repurchase loans if borrowers default in an effort to incentivize banks since the risk is low when Uncle Sam vouches for defaulted loans rather than the banks.
The plan remains controversial and HARP remains one of several government program that was launched with big promises they haven’t lived up to yet. It remains unseen how politics will play into the improvement of these programs leading up to election day.
Photo courtesy of Tim Pierce.