Urban Institute: Here's how HARP gave a much-needed revamp to the refinance market
The amount of times the government has extended its Home Affordable Refinance Program from its original end date in 2013 is almost comical. However, the there’s good intention behind each extension, as the Federal Housing Finance Agency tries to capture as many eligible borrowers before the program expires.
As of March 2017, there were still 143,000 additional borrowers that could benefit from HARP, the Urban Institute stated in a blog about the government’s game-changing refinance program.
The latest extension from the FHFA happened back in August when it extended HARP through Dec. 31, 2018, adding an additional 15 months onto the program’s already extended lifespan.
According to the blog from the Urban Institute, not only has the government refinance program saved borrowers billions of dollars, but it has also created a better foundation for refinancing government loans going forward.
“Before 2009, borrowers were unable to refinance if they had little or no equity in their homes, even if they were current on their mortgage payments.”
“In 2009, the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, introduced the Home Affordable Refinance Program (HARP) to address this problem for the loans that they guarantee, allowing borrowers with little to no equity in their homes to refinance into new loans, often reducing their monthly payments significantly.”
One of the biggest impacts of HARP is that it made policymakers, regulators, and key industry participants rethink how refinance regulation works.
“The impact of the program reaches beyond the 3.5 million borrowers who’ve participated, and even beyond the more than $35 billion in borrower savings. Overhauling the original HARP program required policymakers and industry participants to cut through prohibitive obstacles that not only held this program back, but slowed refinancing down more broadly.”
And thanks to the updates, once HARP expires at the end of 2018, there will be a similar high-LTV refinance program around to help future borrowers in similar situations.
Back when the FHFA announced that that it was delaying the end of HARP to Sept. 30, 2017, the agency said it was extending the program in order to “create a bridge” to a new refinance product that launches in October 2017.
“The new refinance offering will provide much-needed liquidity for borrowers who are current on their mortgage but are unable to refinance through traditional programs because their LTV ratio exceeds the Enterprises’ maximum limits,” according to the announcement on the new program.
While the program starts next month, its impact on the market may take time to be felt. Wells Fargo analysts Vipul Jain, Anish Lohokare, and Randy Ahlgren recently said on the new program, “From our perspective, the program appears to be geared toward having an efficient refinancing construct in place, should there be another housing downturn.”