Mortgage Refinance Focus Expected to Move toward HARP

By Stevie Duffin Updated on 12/27/2012

By Daniel Duffield

Borrowers with mortgages held by Fannie Mae or Freddie Mac may see an increased ability to refinance in the coming year, although borrowers with non-agency loans may find these opportunities nonexistent, according to Compass Point Research & Trading.

For instance, one of the most significant changes is the potential initiation of the extension of the expiration date for the Home Affordable Refinance Program through 2014 from the original expiration date of December 2013, Compass Point sad. However, non-agency borrowers may not find any aid for their underwater mortgages, with the future of HARP 3.0 remaining uncertain.

According to the Compass Point report, the efforts of the federal government to extend eligibility of the HARP program to non-agency borrowers are unlikely to succeed due to issues raised on limitations of action due to “pooling-and-servicing agreements” or the utilization of the FHA for refinance loans.

FHFA Acting Director Ed DeMarco has expressed some contentment with the current trajectory of HARP 2.0, indicating that any updating of the program is unlikely under his authority. However, DeMarco could be replaced in 2013, and borrowers may have some hope for HARP 3.0.

Earlier in December, Bank of America Merrill Lynch reported that it anticipates a successful first quarter for HARP 2.0.

With statistics showing that 700,000 HARP refinances were originated in 2012 with a current month-to-month pace of approximately 100,000 refinances, data for December is expected to reach the 1 million mark for HARP 2.0.

Compass Point has presently stated that one candidate to succeed DeMarco is the current president of Ginnie Mae Ted Tozer, who the company believes is much more liable to extend the HARP deadline.

The Boxer Menendez bill, a measure that would attempt to make cross-servicer refinancing through HARP more appealing, has also been expected to pass during the first quarter of 2013, according to Compass Point.

In the report, Compass Point related that the passage of such legislation would increase overall refinance completion, consequently affecting gain-on-sale margins, though the bill would be severely limited by the failure to prolong the HARP program. However, Compass Point stated, “Ultimately, we believe that the greatest likelihood for mortgage refinancing policy changes remain centered on GSE-backed mortgages rather than nonagency loans.”