FHFA considers changes to HARP
The Federal Housing Finance Agency is considering changes to the Home Affordable Refinancing Program, but Acting Director Edward DeMarco said any moves would be made to help borrowers already eligible. The White House is reportedly working on a major plan to allow some of the 11 million borrowers who owe more on their mortgages than their homes are worth to refinance. Analysts and economists have said in research notes and before Congress that the most likely route would be a revamp of HARP. The program launched in March 2009. Current Fannie Mae and Freddie Mac borrowers with loan-to-value ratios between 80% and 125% could qualify for a refinanced rate set — not by the government-sponsored enterprises — but by the mortgage originator. To date, more than 838,000 borrowers have moved through the program, well short of the 4 million to 5 million originally estimated. "HARP is not a mass refinancing program," DeMarco said at the American Mortgage Conference in North Carolina Monday. "It was designed to address a particular segment of borrowers with loans guaranteed by the enterprises." But answering calls for changes to the program, DeMarco said the conservator was considering it. On the table, he said, are eliminating loan-level price adjustments, representation and warranty claims, valuation requirements and the movement of insurance through the refi and to the new mortgage. "FHFA is carefully reviewing the mechanics of the HARP program to identify possible enhancements that would reduce barriers for borrowers already otherwise eligible to refinance using HARP," DeMarco said. "If there are frictions associated with the origination of HARP loans that can be eased while still achieving the program’s intent of assisting borrowers and reducing credit risk for the enterprises, we will seek to do so." DeMarco said the FHFA may also change the HARP ceiling of 125% LTV. Analysts said waiving rep and warranty claims is unlikely and any changes to HARP would have a minimal impact as lower mortgages rates may not translate directly into avoided defaults as the Congressional Budget Office assumes. Others such as Mark Zandi, chief economist at Moody's Analytics, said program changes would reduce monthly payments for consumers, who might put those savings back into the economy. Regardless, DeMarco expects changing how underwater borrowers refinance to remain troublesome for some time. "There are several challenging issues to work through here and the outcome of this review is uncertain," DeMarco said. Write to Jon Prior. Follow him on Twitter @JonAPrior.