HARP 2.0 Continues to Succeed Where 1.0 Fell Short

Nearly one-half million homeowners refinanced their mortgages in March according to the Refinance Report released by the Federal Housing Finance Agency (FHFA) today. Of the 461,652 refinances closed through Fannie Mae and Freddie Mac (the GSEs) in March, 98,982 or about 21 percent were completed through the Home Affordable Refinance Program (HARP) for a total of 2.46 million HARP transactions since the program began in April 2009.

In the first quarter of 2013 the GSEs refinanced about 1.4 million mortgages. About 22 percent or 300,000 of these were HARP loans, about the same percentage of HARP refinances in the fourth quarter of 2012.

Of the total 2.46 million HARP transactions, roughly half, or 1.37 million have taken place under the revised HARP guidelines put in place at the end of 2011. Those guidelines eliminated the prior 125 percent loan-to-value (LTV) cap on HARP mortgages and during the first quarter of 2013 22 percent of loans refinanced through the program had an LTV greater than 125. During the quarter 45 percent of the HARP loans had LTV ratios greater than 105 percent.

Another revision to the HARP guidelines provided incentives to borrowers to reduce the term of their new loans from that of their old, typically 30 year, mortgages. Thus far in 2013 17 percent of HARP borrowers have opted for 15- or 20-year loans.

Total GSE refinancing in March was down about 2,000 loans from February with Fannie Mae totals dropping from 294,302 loans to 264,778 while Freddie Mac transactions rose from 169,501 to 196,874. Fannie Mae's share of HARP refinancing was down a slight 3,000 loans while Freddie Mac's HARP volume increased by about 4,000.

Thus far in 2012 HARP refinances have represented 63 percent of total refinances in Nevada and 53 percent of total refinances in Florida and underwater borrowers have made up 64 percent or more of total HARP volume in those two states and Arizona.