4 years since its launch date, the Home Affordable Refinance Program (HARP) is enjoying record-high popularity among U.S. homeowners.
Government data shows that HARP refinances now account for more than 20% of all refinance activity, and closed loans will likely top last year’s record tally of 1.07 million.
1 Million HARP Loans In 2012
Each month, the Federal Home Finance Agency (FHFA) publishes a HARP refinance report which includes detailed refinance statistics from all 50 states, plus the District of Columbia.
According to the FHFA, more than 97,000 U.S. homeowners used the Home Affordable Refinance Program in January 2013, a tally which puts the program on pace to out-perform its record-breaking closing figures of 2012.
Last year, the nation’s lenders closed 1.07 million HARP mortgages, comprising nearly half of the 2.26 million HARP closings since the program’s February 2009 inception.
If January’s momentum holds, it will be another record-breaking year for “the Obama Refi”.
Other stand-out statistics from the January 2013 refinance report include :
- HARP accounted for more than half of all refinances in Nevada (66%) and Florida (56%). The national average was 21%.
- 82% of HARP closings were 30-year-fixed to 30-year-fixed. Just 18% of homeowners opted for a shorter loan term.
- Two-thirds of HARP closings were via Fannie Mae’s DU Refi+ program. The rest were Freddie Mac’s Relief Refinance.
In addition, 25% of January’s Home Affordable Refinance Program closings were loans for which the loan-to-value was over 125 percent. 12 months ago, this share was 0 percent.
HARP 2.0 : Unlimited LTV For Underwater Homeowners
We highlight the number of refinances with greater than 125% loan-to-value because HARP did not always allow such loans.
Loans of unlimited LTV is a relatively new option, made possible by the October 2011 update to the Home Affordable Refinance Program known as “HARP 2.0”. The revamped Home Affordable Refinance Program loosened mortgage guidelines to accommodate a greater percentage of U.S. homeowners.
Some of the changes incorporated into HARP 2.0 included :
- No 125% loan-to-value limitation for homeowners using a fixed-rate HARP mortgage
- Elimination of home appraisal when a reliable automated valuation model is available
- Lower loan costs for homeowners opting to shorten a loan term to 20- or 15-year term
Furthermore, the HARP program deadline was extended. U.S. homeowners can refinance with until December 31, 2015.
HARP Expected To Fuel 2013 Mortgage Market
Low HARP mortgage rates are fueling refinances, too.
The typical HARP homeowner refinances a mortgage from 2006-2008, a period when mortgage rates averaged between six and seven percent. In 2013, though, mortgage rates average less than 4 percent.
It’s a hefty drop in mortgage rate and one which translates into very big savings. Via a refinance, HARP homeowners routinely cut 35% or more from their monthly payment.
- Original mortgage from April 2007 : $400,000 loan at 6.50%; Payment of $2,528.
- HARP refi of same mortgage today : $368,000 loan at 3.50%; Payment of $1,652.
That’s a 35 percent savings, and the math applies to all loan sizes in every U.S. state.
It’s no wonder Home Affordable Refinance Program loans are so popular. In Nevada, Florida and Arizona — where loan-to-value routinely exceeds 125% — and in Ohio, Pennsylvania and Texas where loan-to-value is often more modest, HARP loans help homeowners to save money.
Verify Your HARP Eligibility
The Mortgage Bankers Association (MBA) forecasts that 2013 will feature $1.3 trillion in mortgage originations, a large share of which to be HARP-related. Furthermore, this figure would likely swell should the program known as “HARP 3” comes to pass.
Sometimes called #MyRefi, HARP 3 is an even looser version of HARP 2.0; a program expected to assist homeowners whose mortgages are not currently backed by Fannie Mae or Freddie Mac to get access to the Home Affordable Refinance Program. Read more about HARP 3 here.
To verify your HARP eligibility, get started here. See how today’s low mortgage rates can help your monthly payments.