It's been nearly 5 years since the launch of the Home Affordable Refinance Program (HARP). HARP is a loan for homeowners whose homes have lost value since purchase. It's been used more than 2.9 million times since its inception.
However, the effect of HARP has varied by state. In Arizona, for example, more than 6% of homes have been refinanced via HARP since 2009. By contrast, in New York, fewer than one percent of homes have.
The passage of HARP 3 could lessen this disparity, rendering millions of U.S. homeowners HARP-eligible overnight. HARP 3 could pass soon,
HARP is an acronym, short for the Home Affordable Refinance Program. Part of the housing stimulus program launched in 2009, HARP is rolled under the government's Making Home Affordable program.
It's sometimes called "The Obama Refi".
When HARP was first launched, the United States was in a post-financial crisis world. Merrill Lynch had been absorbed by Bank of America; Fannie Mae and Freddie Mac had been placed into conservatorship; and, homeowners were losing their home equity rapidly.
Meanwhile, in part because the economy was sagging, mortgage rates began to drop. Actually, "drop" is too soft of a word.
Between August 2008 and March 2009, the average conforming 30-year fixed rate mortgage plunged 148 basis points, moving from 6.48% before the crash to 5.00% after it, and with no bottom in sight.
It would have been a terrific time for U.S. homeowners to refinance -- except that many had lost too much of their home equity to qualify.
This was the value of HARP.
Via the Home Affordable Refinance Program, homeowners whose homes had lost equity, and whose homes were backed by Fannie Mae or Freddie Mac, were granted access to refinance at the day's low mortgage rates. Private Mortgage Insurance (PMI) was not required for loans which originally had 20% down; and no new PMI was required for homes were which underwater.
After its launch, HARP 1.0 was a hit. It gave homeowners with Fannie Mae- and Freddie Mac-backed mortgages access to a streamline refinance program similar to the FHA Streamline Refinance and the VA Streamline Refinance.
In HARP's first three years, close to one million U.S. households used the program. The government decided that this was too few. It wanted HARP to reach even more households; to offer even more relief to struggling homeowners.
From this desire to "do more", HARP 2.0 was born.
HARP 2 didn't make many changes to the HARP 1.0 guidelines. It just made the program simpler.
For example, under HARP 2, lenders were no longer held responsible for the underwriting errors made by a loan's original bank. This meant that Chase Mortgage could HARP-refinance a Bank of America/Countrywide loan without worrying about whether Bank of America did its job. Wells Fargo could refinance a CitiMortgage without similar concern.
This waiver of liability made refinancing with a new lender possible. Homeowners no longer had to refinance with their current bank or lender, and could shop for the lowest rates and fees available.
Another big change was to allow unlimited loan-to-value (LTV) for all HARP 2 loans.
Unlimited LTV was an especially important provision for underwater homeowners in cities such as Las Vegas, Nevada; Phoenix, Arizona; and, Miami, Florida where home values had dropped faster and farther as compared to other U.S. cities.
In its first month of widespread availability, loans above 125% LTV accounted for 42 percent of all closed HARP transactions. Three times as many loans have closed under HARP 2.0 as compared to HARP 1.
Since the launch of "The Obama Refi", more than 2.9 million U.S. homeowners have used the Home Affordable Refinance Program. Not surprisingly, these closings are concentrated in states where home values fell the most last decade.
California, for example, has closed 404,000 HARP loans since 2009. This is one-third more than the state with the next highest closing total, which is Florida.
However, raw closing tallies don't show the pervasiveness of the Home Affordable Refinance Program among a state's homeowners. A better measure for that is HARP Closings Per Household and, on a per household basis, California fails to crack the Top 10 even.
Since 2009, in California, there has been 1 HARP closing per 31 households. This ratio is far below the rates in states such as Arizona, Nevada and Michigan.
Here's the Top 10 List of HARP Closings Per Capita, By State :
The national average is 1 HARP closing for every 38.8 households.
Meanwhile, at other end of the spectrum, the three "bottom" states for HARP queries on a per capita basis are Oklahoma, South Dakota, and North Dakota. Each averages fewer than 1 HARP closing per 190 state-wide households.
By the end of 2013, the Home Affordable Refinance Program will have been used more than 3 million times -- and there are millions more eligible homeowners. Maybe you are one of them.
Don't want for your lender to call you. Get pro-active about HARP and determine your own eligibility today. Get started with a mortgage rate and see whether can help you save money. You may be eligible and not know it.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
Thaddeus C. Systems Analyst
I am an aspiring homeowner and The Mortgage Reports helps me daily. Thank you for your excellent information.
Dick B. Director of Special Lending
I read The Mortgage Reports because it delivers timely, up-to-the-minute mortgage news. Keep up the good work.
Elizabeth C. Librarian
Thanks to The Mortgage Reports, I have a new, very low rate for my home. I owe you so much.
2015 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)