HARP Refinances Decline among Large Lenders

By Stevie Duffin Updated on 12/14/2012

By Daniel Duffield

The inventory of accessible mortgages that qualify for the Home Affordable Refinance Program (HARP) has diminished among big lenders such as Bank of America, JPMorgan Chase, Citigroup, and Wells Fargo, according to the December prepayment report presented by the Royal Bank of Scotland.

This trend may make a turnaround with an increasing number of mortgages requiring “re-HARPing,” with approximately 500,000 borrowers potentially being eligible for a renewed extension.

At present, however, HARP-eligible homeowners are rushing to refinance, continuing to reduce the available pool of HARP refinance loans. RBS projected lenders will continue to finalize these loans, closing these applications prior to the initiation of the g-fee hike in December.

Analysts have reported that these g-fee hikes will be taking effect sooner than anticipated, consequently slowing down the rate of HARP refinances, according to the report.

In general, JPM constitutes the most consistent HARP lender, with borrowers prepaying these mortgages at a faster rate than any other lender. Despite this, in November, JPM had prepaid at a much more sluggish pace.

Chase prepayments declined 14% from a persistent rate of 48 to 41 for coupon 6s. Likewise, Wells Fargo prepayments decreased 13%, falling from 43 CPR to 37 CPR.

According to Deutsche Bank, Chase and Wells Fargo are anticipated to completely deplete their supplies of HARP borrowers at a faster rate than any other foremost lender.

However, the remaining number of eligible homeowners who have yet to refinance through HARP could potentially lead to an extension of the Dec. 31, 2013 deadline.

Since March, the trends for HARP lending have shifted noticeably as a result of agencies making their automated underwriting systems more accessible.

Bank of America and Citibank prepaid at a slightly slower rate, falling less than 5%. Essentially, the prepayments between the faster-paced and slower-paced HARP lenders have begun to converge.

For instance, compared with BofA, Chase prepaid 9 CPR at a much quicker pace in November, in contrast to 3 CPR faster in December.

"This speed convergence indicates that competition among the lenders may narrow the discrepancy of HARP efficiency over time," the report indicated.

In October, the Mortgage Banker Association (MBA) stated some apprehension regarding an anticipated $1.3 trillion in mortgage originations for 2013, more than 25% below the previous adjusted estimate of $1.7 trillion in 2012.

MBA Chief Economist Jay Brinkmann stated that the MBA expects 2013 refinance originations to be much the same as 2012 expectations, with many refinances occurring within the first half of the year and a rapid decline for the second half.