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HARP May Be Expanded and Extended to Promote Mortgage Refinancing


There’s been a lot of buzz about the Home Affordable Refinance Program lately.

While it has picked up steam in recent months, thanks to the removal of the LTV barrier, it’s still not reaching millions of underwater homeowners in need of a lower mortgage payment.

Fortunately, there have been stirrings of expansions and extensions aimed at including more of these folks in 2013.

Yesterday, U.S. Treasury Department official Michael Stegman hinted of a broader program at the American Securitization Forum conference.

He told attendees that the Obama administration would work to get a refinance program for private-label mortgages (those not owned or backed by Fannie and Freddie) through Congress.

As I’ve noted time and time again, these types of loans make up the minority of outstanding mortgages, but represent the majority of the delinquency problem.

Data from back in 2009 revealed that private-label mortgages accounted for less than 20% of outstanding loans, but nearly two-thirds of all serious delinquencies.

Sadly, these borrowers have not been able to take advantage of programs like HARP and HARP 2.0, which hurts the entire housing market as avoidable foreclosures carry on.

Even if Congress can’t agree on a deal, Stegman said Treasury has the authority to unilaterally modify the “most deeply underwater” mortgages, and compensate investors for some of the lost interest.

New Bill to Protect Lenders and Spur Refis

Along with that piece of seemingly positive news, New Jersey Senator Robert Menendez and California Senator Barbara Boxer plan to introduce new legislation this week aimed at protecting lenders from losses on refinanced loans.

Yes, plenty of loans that are modified or refinanced still wind up in default, with re-default rates often ridiculously high.

Of course, most of those re-defaults seemed to occur early after the housing crisis, when the outlook was gloomy and modifications weren’t as appealing.

Nowadays, those who are still in their homes and electing to receive some kind of rework or modification will probably stick it through, seeing how far they’ve already come.

The yet-to-be unveiled bill from Menendez and Boxer is a new version of a bill that didn’t make it through Congress last year.

Aside from protecting lenders from subsequent defaults, it would also extend HARP another year, until the end of 2014.

The goals here are to:

– Increase program participation by reducing lender liability
– Broaden the pool of borrowers by including non-Fannie and Freddie loans
– Extend the program end-date to allow lenders to process more applications

With home prices on the mend and a broader refinance program in place, mortgage delinquencies, foreclosures, and the shadow inventory would all likely decrease.

Unfortunately, we’ve heard this all before, several times. The most recent proposal, the so-called “Market Rate Modification,” was to be part of fiscal cliff negotiations.

That came and went without a peep – before that Oregon Senator Jeff Merkley proposed a Rebuilding American Homeownership (RAH) mortgage, which again fell on deaf ears.

So will it be different in 2013? Who knows…if Republicans and Democrats can’t work out a deal, more homeowners will probably choose to walk away. And the longer they delay things, the less likely the chances of any new assistance.

If you want to get personally involved, you can sign a White House petition that would allow those who already refinanced via HARP to refinance again, seeing that mortgage rates have dropped so much.

The proposal would also eliminate the current securitization cut-off date of May 31, 2009, meaning those who took out mortgages after that date could take advantage of HARP as well.

It makes sense, seeing that plenty of individuals who bought homes after 2009 are also underwater, thanks to recent home price declines.

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