In 2012, Bank of American has
already issued over 700,000 Home
Affordable Refinance Program (HARP) refinances, and at a rate of
approximately 100,000 HARP refinance per month, statistics for December are
expected to reach the one million refinance milestone in terms of HARP 2.0.
Accordingly, Bank of American
analysts have anticipated HARP 2.0 to be labeled a success for the upcoming
first quarter of 2013.
Early in 2009, approximately 3.5
million borrowers were eligible to receive HARP 1.0 refinances. The Federal
Housing Finance Agency (FHFA) recounted that 931,000 refinances occurred from
the creation of the program to October 2011, with roughly 2.5 million borrowers
eligible to secure a HARP 2.0 refinance.
Considering the borrowers who have
already refinanced, the current population of eligible
HARP borrowers amounts to approximately 2 million. If every eligible
borrower applies for a HARP refinance, mortgage volumes could remain
consistently high through December 31, 2013.
A minimum of 250,000 high credit
borrowers with FICO scores that exceed 750 with a loan size greater than
$175,000 are anticipated to refinance and be pursued by originators.
However, lower mortgage rates and
aggressive lenders may result in a negative response from the remaining 1.7
million HARP-eligible borrowers.
According to analysts, “This
is where we expect capacity growth to make its biggest dent.”
In addition, the date extension of HARP eligibility and the
permission of securing more than one HARP loan will greatly expand exposure and
potentially increase HARP eligibility by 500,000 borrowers for each addition.
For instance, extending the date
allowed for HARP refinances to May 2010 would prospectively increase the amount
of eligible borrowers to 2.5 million. Additionally, extending eligibility to
May 2011 and May 2012 could potentially increase this to 3 million and 3.5
million eligible homeowners, respectively.
With the current rates being paid
by these borrowers, roughly $3 billion dollars could be saved annually by these
homeowners collectively if they refinanced to a 3.4% interest rate.
This constitutes the equivalent of
increased payments from a 0.015% increase in mortgage rates on the current $5
trillion in outstanding mortgage backed securities.
Although, if these volumes begin
to slow, debate may begin as to the effectiveness of the HARP 2.0 program.
According to the report, the risk
of the current Acting Director of the FHFA Ed DeMarco being replaced could
compound these negative prospects.
Despite this, the outcome remains
uncertain and no predictions can be made with full confidence. Statistics demonstrate
that the collective borrower savings can be surpassed by an increase in
mortgage rates, caused by MBS expansion.
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range of mortgage topics, visit www.lender411.com/.
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