Effects of the retooled Home Affordable Refinance Program may start to appear next month, analysts said Monday.
Since the Federal Housing Finance Agency announced
changes to HARP in October, servicers have been adjusting operations. Upfront fees, loan-to-value ratio caps and representation and warranty claims on the old loan file were eliminated for eligible borrowers.
The program launched in March 2009. Roughly 838,000 Fannie Mae
and Freddie Mac
borrowers were able to refinance into lower rates, but only about 7% of them had LTVs above 105%.
Prepayments slowed in December, according to Bank of America Merrill Lynch (BAC)
analysts, dropping 6% on Fannie Mae securities backed by 30-year fixed-rate mortgages.
"We anticipate another uneventful month in January before February provides the first glimpse into the new program’s prospects. Even before then, it is interesting to note that HARP-eligible pools — which responded slowly at the start of the current refinancing wave — continued to show slow, steady prepayment increases this month," BofAML analysts said.
Rumors stirred of another plan from the White House to boost more refinancing. A white paper from the Federal Reserve made the case
for one, along with other suggestions to address still lingering housing problems.
Analysts at JPMorgan Chase (JPM)
said Monday that modifying all coupon stacks of mortgage-backed securities would violate the prospectus. The loans, analysts said, need to be at risk of imminent default for such an action. If Washington started a refi wave on GSE loans and everything was moved into a 4% mortgage, Chase analysts believe it would only result in a total of $25 billion to $30 billion in annual savings for borrowers.
"The dollar savings of such a move are modest in light of the overall economy," the analysts said and would merely be a transfer of wealth from investors to borrowers. "HARP 2.0 theoretically addresses many refi hurdles, and we will learn over the next six months how successful it will be."
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