WASHINGTON, March 13 A U.S. government effort to
help struggling homeowners refinance into cheaper loans gained
traction last year, helped by rising home prices and changes to
the program that made more borrowers eligible for relief, a
report released on Wednesday showed.
Nearly 1.1. million refinances were completed under the Home
Affordable Refinance Program, or HARP, in 2012, more than double
the year-earlier number, the report from the Federal Housing
Finance Agency said.
HARP helps borrowers with loans backed by Fannie Mae
and Freddie Mac - who owe more than their
homes are worth - cut loan payments by refinancing into
It has now been used by about 2.2 million borrowers since it
started in 2009, according to the FHFA, which regulates both
Fannie Mae and Freddie Mac. About 438,200 HARP refinancings were
done in 2011.
The U.S. housing market's recovery has been a significant
driver in the program's ability to help more borrowers. Prices
for new homes have risen every month since February 2012,
boosted by a limited inventory of properties on the market and
historically low interest rates.
That, in turn, has given borrowers a stronger incentive to
try to stay in their homes.
At the same time, the FHFA took steps in 2011 to widen
eligibility for borrowers who had been locked out of the program
because they owed too much on their loans relative to the value
of their homes. It also lowered some fees and waived certain
underwriting requirements to spur lender participation.
"By working with Fannie Mae and Freddie Mac to enhance the
program, we've increased access to HARP, especially for
borrowers who are severely underwater," said Meg Burns, senior
associate director for housing and regulatory policy at the
FHFA. She said the new changes have "proven successful."
CALIFORNIA TUNES IN TO HARP
While the revisions to HARP have resulted in a growing
number of borrowers entering the program, there is mixed
reaction on how much further refinancing will expand.
"HARP is working primarily because house prices have started
to rally. If house prices were to stay depressed, we wouldn't
see this activity," said Anthony Sanders, a finance professor at
George Mason University and a former director of mortgage-bond
research at Deutsche Bank AG. "Is HARP really helping? The
answer is yes, but in a very small way."
Sanders said HARP was intended to speed the housing market's
recovery, but was responsible for only a small part of the
rebound and was dependent on home price appreciation.
Among the states with the most HARP activity since the
program's inception were California, Florida, Illinois, Michigan
and Arizona, where borrowers are often paying above-market
interest rates and are more deeply underwater.
HARP volume represented 22 percent of total refinance volume
in the fourth quarter of 2012, the report noted.
"That's a significant piece of the market and is really
meaningful," said Erin Lantz, the director of the Zillow
Mortgage Marketplace, which has an online tool that lets
homeowners see if they qualify for HARP refinancings and helps
them find lenders.
"I'm not surprised to see the uptick after the program was
retooled and many of the barriers were removed," Lantz said.
HARP, which is scheduled to expire at the end of this year,
is viewed as one of the more successful anti-foreclosure
programs launched by the government in the wake of the housing
The Obama administration's main mortgage assistance effort,
the Home Affordable Modification Program, has resulted in
permanent loan modifications for more than 1.1 million
homeowners. When it was unveiled in early 2009, the
administration predicted it would reach as many as 4 million.