Borrowers with mortgages backed by Fannie Mae (FNMA) or Freddie Mac (FMCC) will have until the end of 2015 to obtain new loans under the Home Affordable Refinance Program, the Federal Housing Finance Agency said today.
HARP previously was scheduled to expire at the end of 2013. The program allows borrowers to cut their loan payments by refinancing at lower interest rates even if they are stuck in homes that have lost value.
More than 2.2 million borrowers have used the program so far. To qualify, homeowners must be current on their payments and have loans originated before June 1, 2009.
HARP is “a useful tool for reducing risk,” FHFA Acting Director Edward J. DeMarco said in a statement. “We are extending the program so more underwater borrowers can benefit from lower interest rates.”
The FHFA will soon begin a marketing campaign to expand the program’s reach, DeMarco said in the statement.
There may be as many as 2 million eligible borrowers who haven’t taken advantage of HARP, according to analysts at Bank of America Merrill Lynch.
HARP loans began to surge last year and now account for almost a third of all refinancing applications, according to the Mortgage Bankers Association. Nearly 1.1 million borrowers used HARP last year alone, equaling the 1.1 million in the first three years of the program combined.
FHFA data show that servicers are offering HARP loans to a growing number of the riskiest borrowers. About a quarter of HARP loans have gone to borrowers who owe more than their properties are worth. In January, nearly half of HARP refinancings were for such underwater borrowers.
HARP has become more popular among lenders as margins shrink on traditional loans. HARP borrowers are less sensitive to higher rates and fees than homeowners who have other options.
Also, securities containing HARP loans bring higher yields because borrowers are less likely to refinance again, preserving the value of the investment.
President Barack Obama has made expanding the reach of HARP a centerpiece of his housing policy, calling for Congress in his Feb. 12 State of the Union address to pass a bill making the program more attractive to lenders. Senate Democrats Barbara Boxer of California and Robert Menendez of New Jersey introduced a bill in February that would implement the president’s request.
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