HARP Refinances Exceed 2012 Predictions

By Gretchen Wegrich

Following the expansion of the Home Affordable Refinance Program (HARP), homeowners in the five US states hardest hit by foreclosures are now leading refinance statistics, strengthening the most vulnerable sector of the housing recovery and surpassing industry predictions.

Since its inception in 2009, HARP has benefited almost 2.2 million underwater homeowners whose loans are backed by Fannie Mae and Freddie Mac. A revision to the program in 2012 made HARP available to homeowners whose mortgage were more than 25 percent underwater.

During 2012, 1.1 million HARP refinances took place, doubling the figures from a year earlier and surpassing FHFA estimates.

“HARP 2.0 is working,” said Patrick Ahn, a mortgage bond trader at Los Angeles-based TCW Group Inc. “We’ve seen many more borrowers take advantage versus the first version.”

In December 2012, one in four loans refinanced under HARP were more than 25 percent underwater, reported the Federal Housing Finance Agency (FHFA).

The number of homes in foreclosure fell from 4.39 percent to 3.74 percent during 2012, reported the Mortgage Bankers Association. During the same time period, home prices increased along with the number of home sales.

HARP the the Rescue

HARP has proven itself to be the most successful government-run housing program. HARP refinances surpassed the 1 million loans modified by the Home Affordable Modification Program (HAMP) and the 114,417 homes in Home Affordable Foreclosure Alternative (HAFA) short sales. Learn more about qualifying for a HARP refinance here.  

In Nevada, where property values were halved by the collapse of the housing market, HARP accounted for 68 percent of refinances in December, reported the FHFA. In Florida, 58 percent of refinances were through HARP.

HARP’s success is a clear indicator of the pent-up demand of underwater homeowners who had no options until the program was modified last year, noted Meg Burns, a senior-level executive at FHFA.

HARP and Mortgage Lending

Mortgage lending is expected to contract by 21 percent in 2013, according to Fannie Mae. Refinances will account for 58 percent of mortgage lending. Analysts predict that banks will continue to profit from borrowers in states with the highest rates of underwater mortgages because many homeowners have been unable to refinance until recently and want to take advantage of HARP.

“Banks can depend on demand from these borrowers because they have mortgages at 6 percent or more,” said Anish Lohokare, a New York mortgage-bond strategist. “The lenders built all this capacity during last year’s surge in refinancings, and now they can sustain their volume through HARP mortgages.”

HARP Facts

The top five states for HARP refinances since 2009 are:

• California (301,327)
• Florida (175,686),
• Illinois (147,252)
• Michigan (144,709)
• Arizona (106,387)

Click here to find a qualified HARP lender.

Gretchen Wegrich

Gretchen Wegrich is an editor at Lender411. She specializes in mortgage basics, personal finance and green living. She graduated with a bachelor's degree in writing from University of California, San Diego and previously worked at the Santa Cruz Sentinel. Contact her at gretchen@lender411com.