HARP Refis Decline Slightly Due to Rising Interest Rates

Total HARP refinance volume in January 2017 declined, according to a report released Wednesday by the Federal Housing and Finance Administration (FHFA). Perhaps this was attributable to the fact that mortgage rates increased in December, but declined in January. The average interest rate on a 30‐year fixed rate mortgage fell to 4.15 percent in January from 4.20 percent in December.

Borrowers completed 4,553 refinances through HARP, bringing total refinances from the inception of the program to 3,452,224. The January numbers represent two percent of total refinance volume during the quarter, and borrowers with loan‐to‐value ratios greater than 105 percent accounted for 16 percent of the volume of HARP loans in that month.

Other facts concerning HARP refis in January include;

• Five percent of the loans refinanced through HARP had a loan-to‐value ratio greater than 125 percent.
• Seventeen percent of HARP refinances for underwater borrowers were for shorter‐term 15‐ and 20‐year mortgages, which build equity faster than traditional 30‐year mortgages.
• HARP refinances represented four or more percent of total refinances in Nevada, Arizona, Florida, Georgia, and Illinois, which is double the two percent of total refinances nationwide over the same period.
• Borrowers who refinanced through HARP had a lower delinquency rate compared to borrowers eligible for HARP who did not refinance through the program.
• Ten states accounted for more than 60 percent of the nation's HARP eligible loans with a refinance incentive as of September 30, 2016.
• From inception through January 2017, 2,887,076 loans refinanced through HARP were for primary residences, 109,633 were for second homes, and 455,515 were for investment properties.

• In January 2017, borrowers with loan‐to‐value ratios greater than 105 percent accounted for 16 percent of the volume of HARP loans. The proportion of HARP refinances for underwater borrowers (LTV greater than 105 percent) refinancing to shorter term mortgages accounted for 17 percent.

• In January 2017, HARP refinances represented 4 percent or more of total refinances in Nevada, Arizona, Florida, Georgia and Illinois, double the 2 percent of total refinances nationwide over the same period. Underwater borrowers accounted for a large portion of HARP refinances in a number of states. In January 2017, underwater borrowers represented 24 percent or more of HARP volume in Nevada and Florida.

HARP was established in 2009 to assist homeowners unable to access a refinance due to a decline in their home value. The inception date of the program was April 1, 2009.

HARP enhancements took effect in 2012 to increase access to the program for responsible borrowers. The program was scheduled to expire on December 31, 2013, and was extended to expire on December 31, 2015. On May 8, 2015, HARP was extended again to expire on December 31, 2016. On August 25, 2016, HARP was extended once more to expire on September 30, 2017.

Below are the basic HARP eligibility criteria:

• Loan must be owned or guaranteed by Fannie Mae or Freddie Mac.
• Loan must have been originated on or before May 31, 2009.
• Current loan‐to‐value ratio must be greater than 80 percent. There is no LTV ceiling.
• Borrower must be current on mortgage payments at the time of the refinance.
• Payment history – borrower is allowed one late payment in the past 12 months, as long as it did not occur in the 6 months prior to the refinance.