HARP Continues to Attract Seriously Underwater Borrowers

Freddie Mac and Fannie Mae (the GSEs) refinanced a total of 97,589 mortgages through the Home Affordable Refinance Program (HARP) in January compared to 76,460 HARP refinances in December.  Fannie Mae participated in 62,519 of the transactions and Freddie Mac in 35,070.  HARP loans represented 21 percent of the 469,953 refinance actions completed by the GSEs during the month.  Total refinances in January exceeded those in December by nearly 110,000 and January was second only to November in the level of overall refinancing activity in the previous 12 month period.

Since HARP was first begun in 2009 2.26 million homeowners have been assisted in refinancing through the program.  HARP was designed for homeowners who were unable to refinance through traditional means because they owned more on their existing Fannie Mae or Freddie Mac loans than the market value of the collateral property.  At the beginning HAMP would fund loans with up to 105 percent loan-to-value (LTV) ratio, later raised to 125 percent.  In the fall of 2011 significant revisions were made to the program including removing all limits on LTV.  Since that time the number of homeowners served through HARP has nearly doubled.

Borrowers with loan-to-value ratios greater than 105 percent accounted for 47 percent of the volume of HARP loans in January while 25 percent were loans with LTVs exceeding 125 percent.

Among other revisions made to the program at the time the LTV cap was eliminated were certain inducements for borrowers to refinance into shorter term mortgages in order to rebuild their equity more quickly.  In January, 18 percent of HARP refinances for underwater borrowers were for shorter-term 15- and 20-year loans.

HARP continued to account for a substantial portion of total refinance volume in certain states. In January HARP refinances represented 66 percent of total refinances in Nevada, more than triple the 21 percent of total refinances nationwide. HARP refinances had a 56 percent market share in Florida, more than double the 21 percent of total refinances nationwide.

Borrowers who are underwater accounted for a large portion of HARP refinances in a number of states.  In Nevada, Arizona, and Florida underwater borrowers (LTVs over 105 percent) represented 68 percent or more of HARP volume.