FM Commentary

FM Commentary

Home Affordable Refinance Program Update: HARP 2.0 is Helping More Homeowners

John ForlinesIn November 2011, changes to the Home Affordable Refinance Program (HARP 2.0) were announced in order to help more borrowers reduce their mortgage payments and/or obtain more stable mortgage loan products. By eliminating loan-to-value (LTV) ratio maximums of 125 percent, increasing the access and use of appraisal waivers, and reducing the maximum amount of loan-level adjustments that apply to HARP loans, HARP 2.0 streamlines the refinance process, simplifies the eligibility requirements, and makes refinancing less expensive for many American homeowners.

The Federal Housing Finance Agency (FHFA), Fannie Mae, Freddie Mac, and the lender community have worked hard over the past 10 months to roll out HARP 2.0. A milestone was reached earlier this summer with the implementation of an MBS execution for loans with LTV ratios greater than 125 percent – the last enhancement that needed to be made under the changes announced in November.

As the program updates were made, the positive effects of HARP 2.0 have been realized through increased loan volume. From January to July 2012, loan volume increased for all LTV buckets. Importantly, this includes the higher LTV buckets where we have seen the greatest need.

FHFA’s July 2012 Refinance Report includes the following key volume highlights:

  • The refinance volume continues to be strong as 30-year mortgage rates reach new record lows.
  • As a percentage of total refinance volume, the HARP volume has grown steadily in 2012 as the enhancements took effect this year. HARP volume represented 27 percent of total GSE refinance volume in July.
  • Borrowers with LTV ratios greater than 105 percent accounted for more than half of the GSE HARP volume.
  • HARP refinances for loans with LTV ratios greater than 125 percent started to surge in June as lenders began selling GSE securities on June 1, 2012.

Fannie Mae-specific HARP acquisition information highlighted in FHFA’s July 2012 Refinance Report is as follows:

Fannie Mae-specific HARP acquisition information highlighted in FHFA’s July 2012 Refinance Report

Even with the early successes, there is still more work to be done. The Fannie Mae team remains very focused on removing as many barriers and obstacles as possible in order to make more borrowers eligible for the program. We’re also providing our customer-facing teams with the tools and resources they need to have strategic, productive discussions with our lender partners.

In July and August, HARP 2.0 check-in discussions were conducted with FHFA, Fannie Mae, Freddie Mac, and lenders. The purpose of these meetings was to discuss what’s working, what’s not working, and what can be done collaboratively to improve results. The outcome has been extremely positive. For instance, earlier this week FHFA announced a new representation and warranty framework to help clarify lenders’ repurchase exposure and liability on loan deliveries. Under the framework, HARP loans sold to the GSEs beginning January 1, 2013, will be eligible for rep and warranty relief after an acceptable payment history of only 12 months following the acquisition date. This is designed to help lenders participate even more fully in HARP and reach more borrowers who can benefit from the program. For more detailed information about this announcement, please see Fannie Mae’s Selling Announcement (SEL-2012-08).

We’ve made other significant changes since our summer check-in discussions, which are included in today’s Fannie Mae’s Selling Announcement (SEL-2012-09). With this announcement, guidelines for HARP and Refi Plus™ – our manual underwriting option for Fannie Mae refinances – have been updated to

  • Eliminate certain representation and warranties when an appraisal is required.
  • Streamline minimum required levels for income and asset documentation when required.
  • Provide additional options to supplement the current verification of employment or source of income requirements.
  • Provide additional options for qualifying the remaining borrower when another borrower is removed from the loan.
  • Eliminate the comparable schedule of rents form (Form 1007) for investment properties.

We are very pleased with the early results of HARP 2.0 and we are hopeful they will continue as a result of the changes announced today. At Fannie Mae, we’re committed to helping as many borrowers as possible have access to a refinance opportunity, and we continue to look for new, effective ways to make that happen.

John Forlines
Senior Vice President & Chief Risk Officer

September 14, 2012

The views expressed in these articles reflect the personal views of the authors, and do not necessarily reflect the views or policies of any other person, including Fannie Mae or its Conservator. Any figures or estimates included in an article are solely the responsibility of the author.
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