HARP 3.0 : Homeowners Prepare For HARP 3 Passage As HARP 2 Mortgages Slow
New data from the Mortgage Bankers Association (MBA) shows that mortgage refinances are slowing. It's a function of rising rates.
However, even as U.S. mortgage rates rise, demand for the Home Affordable Refinance Program (HARP) remains strong. There are millions of still-eligible U.S. households and many have chosen to their HARP loan while they still can.
Through the first five months of 2013, HARP loan closings increased 60% as compared to the same period during the year prior. Furthermore, should the much-anticipated HARP 3.0 program pass Congress, that figure could double, triple or more.
There is a nationwide demand for HARP 3.0. Homeowners hope to see the program by September.
What Is The HARP Home Loan Program?
HARP is an acronym. It stands for Home Affordable Refinance Program. It's a government-backed mortgage refinance program first released in March 2009 and meant to U.S. homeowners get access to the low mortgage rates of the day.
The stated goal of the Home Affordable Refinance Program program was two-fold.
First, the government aimed to help the average U.S. homeowner save $3,000 annually via refinance. Second, the government aimed to reach seven million U.S. households.
If consumers could reduce their housing payments by $21 billion each year, the government reasoned, some of that saved money would work its way back into the U.S. economy which would help combat the burgeoning economic pullback.
Via HARP, homeowners whose homes had lost equity since the date of purchase were eligible for refinance despite having little or no home equity left. This was a big deal in 2009. Homes in many metropolitan areas were losing 10% or more of their value annually.
Within 12 months of its launch, it was clear that the "Obama Refi" program would achieve its first goal. Eligible homeowners were saving large amounts of money on their mortgage. However, the program was failing to meet its second goal.
By mid-2011, the Home Affordable Refinance Program had not even helped one million U.S. households, let along multiple millions. So, to put the program within reach of more people, the government made aggressive changes to how the Home Affordable Refinance Program program worked.
Dubbed "HARP 2", program updates included :
- Remove loan-to-value limitations; allow unlimited LTV for HARP loans
- Remove specific lender liabilities on a HARP-refinanced loans
Under HARP 2, the pace of refinancing tripled. Homeowners saved even more than the government's vaunted $3,000 target figure. The typical HARP homeowner saved 35 percent monthly.
Today, HARP 2 is on pace to top 1 million closings for the year. That tally may leap, though, if HARP 3.0 passes Congress as expected.
HARP Helping "Severely Underwater" Homeowners
As part of HARP 2.0, program guidelines allowed for an unlimited loan-to-value (LTV). It's no surprise, then, that one-in-four HARP home loans feature an LTV over 125%.
There are other interesting refinance patterns among the Home Affordable Refinance Program closings, too.
For example, in May, 25% of homeowners opted for a 15-year fixed rate or 20-year fixed rate HARP loan -- both of which can replace lost home equity more quickly than a comparable 30-year loan.
There were other notable data points, too :
- 20% of all May U.S. refinance activity was Home Affordable Refinance Program-related.
- Nearly 40% of all Home Affordable Refinance Program loans have an LTV over 105%.
- Fannie Mae securitizes 59% of May's HARP 2 loans. Freddie Mac handled 41%.
Furthermore, HARP loans remain concentrated by state. Nevada, Arizona and Florida account for a disproportionate number of high-LTV loans. Prior to HARP 2.0, these refinance opportunities did not exist.
If HARP 3.0 passes Congress this year, the distribution of HARP home loans will spread geographically. It's part of what the White House calls "A Better Bargain".
Are You HARP-Eligible? Automate The Process.
To date, the Home Affordable Refinance Program has reached 38% of its intended 7-million-home market. With the program slated to end December 31, 2015, it seems more and more likely that HARP 3 will pass. Rumors grow louder each month.
See how HARP program can save money. See for what rates you qualify. The process is fast and free.