By Alan Zibel
The number of homeowners who have refinanced their home loans under a revamped federal program for those with sunken property values is rising, but the effort is just starting to reach the most severely “underwater” borrowers.
Statistics released Friday by the Federal Housing Finance Agency show that more than 41,000 homeowners who owe more than 105% of their home’s current value completed refinances through the government’s Home Affordable Refinance Program in the first quarter of this year. That was more than triple the level in the final quarter of last year.
“There really is a great response from consumers,” said Meg Burns, the FHFA’s senior associate director for housing policy.
But so far, relatively few homeowners who are deeply underwater have completed the refinancing process. Only about 4,400 homeowners who owe more than 125% of their home’s value have refinanced under HARP to date. Officials at FHFA expect that number to grow once those loans can be packaged into mortgage-backed securities, a process that’s expected to be complete this summer.
The Obama administration and the housing regulator, which oversees mortgage giants Fannie Mae and Freddie Mac, rolled out several changes last fall that were designed to make more refinances happen. Before those changes, Fannie and Freddie’s borrowers were blocked from refinancing if they owed more than 125% of their home’s value.
The revamped program, nicknamed HARP 2.0. has been implemented gradually. Some of the biggest lenders are only refinancing their existing borrowers, though FHFA says 25% of loans refinanced under HARP involve borrowers switching to a new mortgage company.
Still, Fred Glick, a Philadelphia-based mortgage broker, said homeowners with loans backed by Fannie Mae are having an easier time getting HARP refinances than those with Freddie Mac loans. With Freddie Mac, he said, lenders are imposing tighter credit standards and are less willing to refinance deeply underwater loans.
“There are so many twists and turns in this thing,” Mr. Glick said. “People are pretty frustrated.”
However, Brad German, a Freddie Mac spokesman, said the government-controlled company has “worked with our regulator to align our programs so there shouldn’t be significant differences. We continue to work with our lenders as they implement HARP 2.0 to help them help more borrowers.”
The Obama administration worked with FHFA, an independent regulator, to put together the reworked program last year. But this year, they have been at odds over whether it should be expanded further.
The administration is backing legislation by Sens. Robert Menendez, (D., N.J.) and Barbara Boxer (D., Calif.) that enact several changes, including making it easier for homeowners to refinance with a new lender by limiting the risk that the lender will be required to buy back the loan.
However, the FHFA’s Ms. Burns cast doubt on the need for those changes, which would require Fannie and Freddie to update their technological systems. “I would hate to see the progress slowed by additional program changes,” she said.
For the entire HARP program, which extends to borrowers who owe more than 80% of their home’s value, the number of new refinanced loans nearly doubled to more than 180,000 in the January-March period from 93,000 in the prior quarter, according to FHFA’s statistics. And since the program started more than three years ago, about 1.2 million homeowners have completed HARP refinances.