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HARP loans jump to 20 percent of Fannie, Freddie refis; 2012 HARP refis already exceed 2011 HARP refis

by Broderick Perkins

(7/26/2012) - The new and improved, so-called "HARP 2.0" is paying off.

Imagine what a difference HARP 3.0 would make.

One in five Fannie Mae and Freddie Mac refinances were refinanced through the Home Affordable Refinance Program (HARP) in May, the largest share since HARP's inception back in 2009.

Attribute the jump to low mortgage interest rates and the upgrade to HARP 2.0 which allowed more underwater homeowners to take advantage of an Obama Administration's Making Home Affordable program.

The Federal Housing Finance Agency's (FHFA) latest "Refinance Report" also said low mortgage rates were responsible for 78,000 HARP refinanced mortgages during the first five months of this year - more than the total for all of 2011.

In May, borrowers with greater than a 105 percent LTV accounted for nearly one third of HARP volume.

HARP upgrades are particularly paying off for homeowners in states hardest hit by the housing crisis.

HARP refinances represented over 40 percent of total refinances in Nevada, Arizona, Michigan and Florida, compared to 20 percent nationwide. Underwater borrowers represented more than half of HARP volume in Nevada and Arizona and 40 to 50 percent of HARP refinances in Florida, Idaho and California.

"These numbers show HARP 2.0 is accomplishing the goals set forth - to provide relief to borrowers who might otherwise be unable to refinance due to house price declines," said FHFA Acting Director Edward J. DeMarco.

"Borrowers with Fannie Mae- or Freddie Mac-backed loans, who are current on their underwater mortgages are taking advantage of the opportunity offered by HARP 2.0," DeMarco added.

FHFA also said an increasing number of homeowners are using record low mortgage rates in the 3.5 percent- and lower-range to hedge their bets with shorter-term 15- and 20-year mortgages, which build equity faster than 30-year mortgages.

Greater HARP improvements in the works would also help even more homeowners who don't hold Fannie and Freddie loans.

HARP 2.0 enhancements

HARP became HARP 2.0 earlier this year with a round of enhancements, including:

• Eliminating some risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for others.

• Removing the 125 percent loan-to-value (LTV) ratio ceiling for fixed-rate mortgages.

• Waiving certain representations and warranties that lenders commit to when making loans guaranteed by Fannie or Freddie.

• Eliminating a new property appraisal when there is a automated valuation model (AVM) available.

How to play HARP

To be eligible for a HARP refinance, before the program expires on Dec. 31, 2013:

• Your mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac.

• Your loan must have been delivered to Fannie or Freddie on or before May 31, 2009.

• Your current LTV ratio must be greater tan 80 percent.

• You must be current on your mortgage, but are allowed one late payment in the past 12 months, so long as the late payment did not occur in the six months prior to the refinance.

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