The effect on valuations and prepayments in the secondary mortgage market from the extension of the Home Affordable Refinance Program should be minimal, according to Barclays Capital analysts. The Federal Housing Finance Agency extended HARP for one year. The program launched in March 2009, allowing borrowers to refinance their Fannie Mae and Freddie Mac mortgage out of negative equity and into a lower-rate mortgage. The program is now set to expire June 30, 2012. The FHFA also made adjustments to the program. Before Fannie Mae loans could only qualify for HARP if they were originated before March 2009, but that cut-off date moved to May 2009 with the extension. Also, HARP loans will be exempt from recently changed Freddie Mac fees. Earlier in March, Freddie began increasing loan-level pricing adjustments, pushing the fees as high as 50 basis points depending on FICO scores and loan-to-value ratios. “By exempting new HARP loans from these fees, the FHFA has effectively made the proposed fee change a non-event for HARP borrowers, and thus, this change should not have an impact on speeds,” BarCap analysts said. The program extension, however, gives underwater borrowers needed relief and provides more business for lenders. Steve O’Connor, the vice president of public policy and industry relations at the Mortgage Bankers Association said HARP allows a significant number of borrowers to refinance into more stable mortgage rates when they otherwise wouldn’t have the chance. “Extending the program will allow lenders to continue to offer this benefit to more borrowers,” O’Connor told HousingWire Monday. Valuations on the To Be Announced market should be little changed, according to analysts’ modeling. But on the secondary side, the TBA market covers forward mortgage-backed securities trades. On the TBA market, the delivery of the MBS is not designated at the time the trade is made and are “to be announced” 48 hours before the trade settlement. “As we have discussed previously, a one-year extension of HARP was our base-case view, and we believe this change, by itself, should have limited impact on both prepayments and valuations,” analysts said. Write to Jon Prior. Follow him on Twitter: @JonAPrior