FHFA Revises HARP to Help Homeowners in NeedOctober 24th, 2011 by DWM Magazine
The Federal Housing Finance Agency (FHFA), with Fannie Mae and Freddie Mac, announced a series of changes to the Home Affordable Refinance Program (HARP) in an effort to attract more eligible borrowers who can benefit from refinancing their home mortgage. The program enhancements were developed at FHFA’s direction with input from lenders, mortgage insurers and other industry participants.
The new program enhancements address several key aspects of HARP including:
• Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers;
• Removing the current 125 percent LTV ceiling for fixed-rate mortgages backed by Fannie Mae and Freddie Mac;
• Waiving certain representations and warranties that lenders commit to in making loans owned or guaranteed by Fannie Mae and Freddie Mac;
• Eliminating the need for a new property appraisal where there is a reliable AVM (automated valuation model) estimate provided by the Enterprises; and
• Extending the end date for HARP until Dec. 31, 2013 for loans originally sold to the Enterprises on or before May 31, 2009.
The announcement has gotten some positive feedback so far from the home-building industry.
“It is encouraging that the Obama Administration is beginning to turn its attention to restoring the nation’s housing market, which is crucial for the health of our economy,” says Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. “Making more borrowers eligible for refinancing their mortgages by enhancing the HARP will give a badly needed boost to consumer confidence. Enabling additional home owners to take advantage of today’s low mortgage interest rates in cases where their loans are greater than the value of their homes will give some households more money to spend on other things and enable others to at least pay their mortgages off at a faster rate.”
Nielsen adds, though, that for those families who have fallen behind in their payments because of the weak job market, the changes to HARP will have no benefit.
“HARP is only open to mortgage borrowers who have remained current with their payments. Clearly, additional policy initiatives are urgently needed to prevent foreclosures and deal with the inventory of foreclosed homes.”
He also says “it is essential to address overly restrictive mortgage lending standards, inappropriate credit limitations on home builders and a broken appraisal system that is contributing to housing price instability. All of these factors are detrimental to the full-scale housing recovery we need to rally consumers and get a disappointing economic recovery moving forward.”
According to Nielsen, there is still a tremendous amount of work that needs to be don in order to repair housing.
“The HARP changes are a good step, but our leaders in Washington need to quickly focus on a broader range of actions for improving the housing marketplace,” says Nielsen.