HARP effective, but faces challenges

by Ryan Smith12 Aug 2013

The Home Affordable Refinance Program has been largely successful, but challenges remain, according to a report published by the Federal Housing Finance Agency’s Office of the Inspector General.

HARP was created in 2009 designed to assist borrowers who are unable to refinance their mortgages because they have little or no equity in their homes. When HARP was announced, the government estimated that 4 to 5 million borrowers could refinance under the program, according to the OIG report. 

By 2011, however, les than a million borrowers had taken advantage of the program. Homes with LTVs greater than 125% weren’t eligible for the program, and HARP’s short duration (about 15 months) kept lenders from investing the resources to market or originate HARP loans.

In response to feedback from borrowers and lenders, the FHFA made several changes to HARP, including removing the 125% LTV ceiling and extending the program through 2015. Once the changes were in place, volume increased substantially, the OIG found. 

“As of March 2013, 2.4 million HARP refinances had been completed,” the OIG reported. 

Challenges remain, however. “It is difficult … to project how many HARP-eligible loans will ultimately be refinanced,” the OIG reported. “Several unknown variables, including interest rates, lender participation, and borrowers’ willingness to refinance, make any estimate uncertain.

“Today, impediments to the program’s success remain,” the OIG noted. “Educating borrowers and encouraging their participation continues to be a major challenge.”


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