Lenders and borrowers encouraged to give HARP a try during extension
With more than 300,000 Fannie Mae loans still eligible for the Home Affordable Refinance Program (HARP), Fannie Mae hopes to encourage lenders and borrowers to take advantage of the most recent extension of the program.
In August, the Federal Housing Finance Agency (FHFA), the regulator of Fannie Mae and Freddie Mac, extended HARP through Sept. 30, 2017. The program had been scheduled to expire at the end of 2016.
“We remain committed to reaching as many eligible borrowers as we can,” says Blake Hampton, HARP program manager for Fannie Mae. “Those consumers should work with their lenders to refinance and take advantage of the flexibilities HARP offers.”
What is HARP?
HARP, introduced by FHFA in March 2009, is a mortgage refinance program designed to help homeowners who are current on their mortgages but who have little or no equity in their home. Without HARP, these borrowers typically would not be able to refinance, but HARP enables them to refinance into more affordable or shorter-term mortgages without new or additional mortgage insurance.
The program has undergone a number of changes since its inception, including the removal of the loan-to-value (LTV) ceiling and the removal of property appraisal requirements under certain situations, among other changes.
HARP currently allows homeowners with an LTV ratio greater than 80 percent to qualify. Borrowers must have a mortgage owned or guaranteed by Fannie Mae or Freddie Mac, have originated the loan on or before May 31, 2009, and be current on their mortgage payments with no late payments in the last six months and no more than one late payment in the last 12 months. They must also receive a benefit from the refinance such as a reduction in their monthly mortgage payment.
“Even though Fannie Mae hit a milestone in January by helping its 2 millionth homeowner refinance under HARP, we are still focused on the program,” Hampton says. “Borrowers can still benefit from the current low interest-rate environment by lowering their payment or shortening their mortgage term. There are still a lot of borrowers out there who are eligible for HARP and haven’t taken advantage of it.”
Homeowners who have refinanced under HARP have saved an average of $200 a month.
HAMP to HARP
As an example of a specific area of current focus, Fannie Mae has worked to encourage borrowers whose loans were modified under the FHFA’s Home Affordable Modification Program (HAMP) to inquire as to whether they qualify for HARP.
Permanent HAMP modifications require interest-rate resets after five years, which then reset every year until the interest rate reaches the market rate that existed at the time of the loan modification.
Market interest rates at the time of most HAMP modifications were around 5 or 5.5 percent — higher than today’s rates, which makes moving into a HARP refinance attractive. Having a HAMP modification doesn’t prohibit a borrower from taking advantage of HARP.
Hampton says Fannie Mae is encouraging any borrower with a mortgage modification on a loan originated prior to June 1, 2009, whether it is a HAMP mod or a private modification, to speak to a lender if they will have a rate reset to a rate that is higher than current market rates and if the rate reset will occur after HARP expires.
Encouraging Lenders to Advocate for HARP
Borrowers may not be as aware of the program or its extension, because lenders simply aren’t pushing HARP as they did when it was originally released.
Fannie Mae, Freddie Mac and the FHFA, for example, held events in some metro areas with high concentrations of underwater borrowers. While they are no longer holding such events, they hope lenders will still work to get the word out about the extension.
Fannie Mae recently refreshed its marketing collateral available in its online marketing center — allowing lenders to create customizable HARP collateral, including collateral for modified loans. By utilizing the marketing center, lenders can showcase their logo, add their contact information, customize colors to match their own branding, choose images from Fannie Mae’s photo gallery and use their own product names, if applicable.
Lenders who visit the marketing center must create an account to access Fannie Mae’s catalog of materials to find the marketing communication pieces that best suit their needs.
“We hope that lenders will see that Fannie Mae is still committed to HARP and that lenders, as a result, will keep capacity in the market for this program,” Hampton says. “Lenders are still using the program, and volume is still coming in.”
According to FHFA figures, Fannie Mae is still doing about 3,000 HARP loans a month. While this volume is lower than in years past, it has remained fairly consistent all year.
“It’s a great program,” Hampton says. “There are still a lot of borrowers eligible, and they should take advantage of very low interest rates to put themselves in a better position.”