The Federal Housing Agency recently extended the Home Affordable Refinance Program (HARP) to 2015. The program was originally set to expire at the end of this year. This will allow homeowners access to the program for two more years. According to Ed DeMarco acting director of FHFA, the program gives more homeowners whose loans are backed by Freddie Mac or Fannie Mae an opportunity to benefit from the lower interest rates. He said, “More than 2 million homeowners have refinanced through HARP, proving it a useful tool for reducing risk.”
Fannie and Freddie are both overseen by FHFA. However, no data was provided regarding how many homeowners still qualify for the program. A nationwide campaign to inform borrowers about the HARP program and its eligibility requirements will be launched by the agency. HARP was created so that underwater homeowners, (borrowers who owe more on their mortgages than what the home is worth) could refinance with lower interest rates and reduce taxpayer risk.
In order to be eligible, you can’t have a previous refinanced loan, the loan to value ratio of your home must be 80 percent, and you must be current on your mortgage with no late payments in the last six months, and no more than one late payment in the last year.
The program was revised in 2011 changing the loan to value ratio to more than 125 percent and reduced lender liability on certain loans to entice them to market to their own clients. HARP 2.0 also eliminated the requirement for new property appraisals.
However, there are still critics of this program. According to analysts, Bank of America, JP Morgan Chase, and Wells Fargo, the largest mortgage servicers, are charging higher interest rates to borrowers who qualify and then making more money by selling the loans to Fannie and Freddie in bulk.
Complaints made by consumer advocates allege that consumers aren’t getting the lowest rates available even though there’s not a lot of work or cost for the servicers to offer the program, and the servicers can still obtain fee income from their captive flood and title insurance arms. Yet another issue is that banks are only picking out loans from their own servicing portfolios and will not offer refinance options to loans that they don’t service.
Meanwhile, Mark Zandi, chief economist for Moody’s Analytics is who is rumored to be a contender for replacing Ed DeMarco as director of FHFA. Zandi wrote in an editorial in the Washington Post describing HARP, “Fannie and Freddie still are not promoting refinancing as aggressively as they should. Washington needs to attract more private lenders back into the mortgage business. He added that the “limbo status of Fannie and Freddie makes little sense” and that lending is being discouraged due to the uncertainty surrounding their fate.
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