Federal Reserve Bank Of New York Report Suggests Two Tweaks To HARP
The old saying goes “If isn’t broken, don’t fix it.” We all know that that saying would almost never apply to a government program and that goes for the HARP program.
Although HARP 2.0 marked a significant improvement over its predecessor it still contains many holes that don’t allow homeowners to take advantage. The surging prices here in San Francisco and much of the Bay Area have reduced the number of underwater homeowners, however many distressed homeowners still exist and they can’t qualify for HARP 2.0.
A recent report from the Federal Reserve Bank of New York stated that if two tweaks were made to the Home Affordable Refinance Program (HARP), refinancing activity could increase “substantially.”
Although underwater homes have decreased significantly here in the Bay Area, Lender Processing Services estimate that about 7.3 million loans nationwide remain underwater.
Two Tweaks Include Removing Cutoff Dates and Allowing Refinance More Than Once
One of the tweaks that have been suggested would be to remove the cutoff date that limits eligibility to Fannie Mae and Freddie Mac loans that were obtained by June 1, 2009. The second change would be to allow borrowers to refinance under the program more than once.
The New York Fed report states that by eliminating the cutoff date entirely the number of borrowers who would be “in the money” would increase to more than 530,000, up about 30 percent. Those “in the money” borrowers are those who could recoup the costs of refinancing within three years based on the savings from HARP.
Under current guidelines, the report authors estimate there around 1.5 million borrowers exist who would be eligible for HARP and in-the-money.
Additionally, removing the rule that limits borrowers to just one HARP refinance would increase by over 55 percent.
If the banks and government keep tinkering with HARP 3.0 then maybe they will get it right.