Come February, Will HARP 2.0 Be Homeowners' Valentine?

by Chicago Agent

Will HARP be anyone's valentine? February should give inklings to the program's effectiveness.

HARP 2.0, the official name given to the Home Affordable Refinance Program after a series of revisions in October, has been a factor in the housing market for more than four months now, and some analysts are predicting its early effects may begin to materialize in February.

The many alterations and revisions introduced in HARP 2.0 included the removal of the program’s 125 LTV ratio ceiling, the elimination of risk-based fees for refinancings of shorter-term mortgages and the waiving of appraisals when automated valuation models existed.

Though not everyone was praising of the revisions (Felix Salmon famously dubbed HARP 2.0 “Obama’s pathetic refinancing initiative“), the lifespan for the new policies has not been long enough for their full impact to be measured; according to a new HousingWire article, though, come February, that may no longer be the case.

Analysts at both JPMorgan Chase and Bank of America are both offering glimpses into the program’s early impacts, and so far, it appears that slow and methodical has been the name of the game.

A Bank of America analyst, for instance, highlighted February as the month when the true impacts of HARP 2.0 can begin to be assessed.

“We anticipate another uneventful month in January before February provides the first glimpse into the new program’s prospects,” the analyst said in HousingWire’s article. “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.”

The analysts at JPMorgan Chase had similar reactions, opting for a wait-and-see approach rather than make any rash judgments on the program’s effectiveness.

“HARP 2.0 theoretically addresses many (refinancing) hurdles, and we will learn over the next six months how successful it will be,” Chase’s analyst said.

What none of the analysts did address, though, was whether Fannie Mae’s most recent change to HARP eligibility would be reflected in February’s results. At the end of December, Fannie eliminated the requirement that all borrowers needed to be assessed by their lenders based on their perceived ability to repay their refinanced mortgages, a change that Barclays predicted would allow a large number of homeowners to refinance.

Originally launched in March 2009, HARP has helped roughly 838,000 borrowers of Fannie Mae and Freddie Mac mortgages to refinance their loans, though that number is short of the Treasury’s stated goal of 3 to 4 million homeowners.

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