October 2016 - Changing of the Guard

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48 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T SERVICING THE LATEST FHFA Extends HARP, Rolls Out High LTV Refi Option HARP has been reset to expire in September 2017, and the GSEs will also offer a new high LTV refinance program with no expiration date. T he Federal Housing Fi- nance Agency (FHFA) announced in August it will extend its Home Affordable Refinance Program (HARP) until September 30, 2017. HARP was scheduled to expire at the end of this year. In its Q2 Refinance Report released in mid-August, FHFA reported there are still a few hundred thousand borrowers eligible to refinance through HARP who have not done so. As of the end of Q2, approximately 3.42 million borrowers have refi - nanced through HARP since the program's launch in early 2009. "There are still more than 323,000 U.S. borrowers eligible for the program who have a financial incentive to refinance, as of the first quarter of 2016," FHFA stated in its report. "These so called 'in- the-money' borrowers meet the basic HARP eligibility require - ments, have a remaining balance of $50,000 or more on their mortgage, have a remaining term on their loan of greater than 10 years, and their mortgage interest rate is at least 1.5 percent higher than current market rates." FHFA launched HARP in early 2009 as a way for borrow - ers who are current on their mortgages but have little or no equity to take advantage of low interest rates and other refinanc- ing benefits. The program was originally scheduled to expire at the end of 2011, but was extended to 2013, then extended to the end of 2015, then to the end of 2016. Though the number of total HARP refinances topped more than 3.4 million and the total refi - nance volume increased in June, the 18,310 borrowers who refinanced through HARP in the second quarter represented only 4 percent of total refinances—the lowest share for HARP since Q2 2009, when the program was launched. FHFA estimates that eligible borrowers who refinance through HARP can save approximately $2,400 per year on mortgage pay - ments. The agency has made at- tempts to reach borrowers eligible for HARP through a series of outreach events in cities with the most eligible borrowers (Chicago, Atlanta, Detroit, Miami, Newark, and Phoenix), webinars, websites, and social media campaigns. Slightly more than one-quarter (26 percent) of HARP refinances as of the end of Q2 were for 15- or 20-year mortgages, which typically build equity faster than 30-year mortgages. FHFA also reported that 10 states accounted for more than 60 percent of remaining HARP-eligible bor - rowers who have an incentive to refinance: Florida, Illinois, Ohio, Michigan, Georgia, Pennsylvania, New Jersey, California, New York and Maryland. Also in August, the FHFA announced that Fannie Mae and Freddie Mac, at FHFA's direction, will be implementing a refinanc - ing option for borrowers with high loan-to-value (LTV) ratios. To qualify for the new high LTV refinancing option, borrowers: • Must not have missed any mortgage payments for the previous six months; • Must not have missed more than one payment in the previ- ous 12 months; • Must have a source of income; • Must receive a benefit from the refinance, such as a reduction in their monthly mortgage payment. The new refinancing option will make use of the lessons learned from HARP and its streamlined approach to refinanc - ing, according to FHFA. "Providing a sustainable refi- nance opportunity for high LTV borrowers who have demonstrat- ed responsibility by remaining current on their mortgage makes financial sense both for bor- rowers and for the Enterprises," said FHFA Director Melvin L. Watt. "This new offering will give borrowers the opportunity to refinance when rates are low, making their mortgages more af - fordable and thus reducing credit risk exposure for Fannie Mae and Freddie Mac." Like HARP, borrowers, with the new high LTV refinancing option, borrowers are not subject to a minimum credit score, there is no maximum debt-to-income ratio or maximum LTV, and an appraisal will often not be required. Unlike HARP, there are no eligibility cut- off dates with the new high LTV refinance option, and borrowers can use the option more than once to refinance their mortgage. "We are pleased to move forward with a new stream - lined refinance option scheduled for October 2017," said Andrew Bon Salle, EVP, Single-Family Business with Fannie Mae. "Aimed at borrowers with high loan-to-value (LTV) ratios, the new option builds on the suc - cesses of the Home Affordable Refinance Program (HARP) and will provide sustainable refinance opportunities to borrowers with existing Fannie Mae mortgages who are making their mortgage payments on time. "At the direction of the Federal Housing Finance Agency (FHFA), Fannie Mae will continue to offer HARP through September 30, 2017 to ensure that eligible borrowers can take advantage of the existing HARP program. We look for - ward to working with FHFA and Freddie Mac to provide needed liquidity so eligible homeowners can take advantage of low interest rates and refinance into more affordable mortgages." Dave Lowman, EVP, Single- Family Business at Freddie Mac, said, "Our forthcoming high loan- to-value (LTV) offering, which is scheduled to be available in October 2017, will allow eligible borrowers to refinance into more affordable and sustainable mort - gages as interest rates continue to be at historic lows. We expect to carry through many of the most successful features of the Home Affordable Refinance Program (HARP), including its streamlined documentation requirements. In the interim, at the direction of the Federal Housing Finance Agency (FHFA), both Freddie Mac and Fannie Mae will continue to offer HARP through Sept. 30, 2017. We look forward to working with the FHFA and Fannie Mae to continue providing liquidity in the market and supporting American homeowners." "At the direction of the Federal Housing Finance Agency (FHFA), Fannie Mae will continue to offer HARP through September 30, 2017."

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