In late October, the Federal Housing Finance Agency announced a “new and improved” version of the Homes Affordable Refinance Program (HARP) dubbed as HARP 2.0 The intent of the program is to make it easier for underwater homeowners to refinance their homes at the current low interest rates. Eligibility criteria includes the following:
- Loan must be originated before June 2009
- Only applies to loans backed by Fannie Mae or Freddie Mac
- Must not have missed a payment in the last 6 months
- Must have missed only one payment in the past 12 months
Most estimates are that the changes in the program could result in one million home owners being able to refinance their homes at the current low interest rates who would not otherwise be able to do so. This is double the number helped by HARP since its inception in 2009. On average, this could save homeowners on average of up to $2,500 per year on their mortgage payments.
Despite the program’s intent and projected impact, it is met nearly universally with faint praise. In a recent report, real estate data and analytics firm CoreLogic, stated, “The revamped mortgage and refinance program may be somewhat of a boon to the hardest-hit housing markets because they have the largest share of borrowers in negative equity, but the plan isn’t a panacea for all that ails the housing market.” CoreLogic went on to warn that HARP 2.0 fails to address two of the issues plaguing the housing market today: the number of distressed U.S. borrowers (over 14 million) and the nation’s shadow inventory (6.37 million REO properties). The report went on to say that despite some of the positive impacts of the program, it will not significantly reduce strategic defaults (homeowners choosing to walk away from their homes because they see if in their financial best interest.) “This is because the program only offers the potential of lower payments but doesn’t reduce principal, so borrowers will continue to hold mortgages that are significantly higher than the values of their homes.”