Refinancing Jumps Under HARP 2.0

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Applications for mortgage refinancing have seen a sharp increase since new, relaxed guidelines for the Home Affordable Refinance Program (HARP) were unveiled last fall, the White House announced last week.

Nationwide, refinancing applications have increased by 50 percent since last fall, with much of it driven by demand for HARP refinances, according to White House figures. Approximately one-third of all current mortgage refinance applications are for HARP loans, according to administration figures, up from one in 10 a year ago.


Mortgage servicers are handling nearly half a million refinance applications, HUD Secretary Shaun Donovan told the Senate Banking Committee last week, with a potential average annual savings of $2,500 per homeowner. By contrast, approximately 1 million mortgages have been refinanced through HARP since the program was launched in spring 2009.


Big increases in states with high underwater rates


The biggest increases in refinance demand have come from states with high rates of underwater homeowners, those owning more on their home loans than their property is worth. Refinance applications in Nevada, where 61 percent of mortgage borrowers are underwater, are up by 267 percent since the new HARP guidelines were announced last fall.


In Arizona, where nearly half of all mortgages are underwater, refinance applications have increased by 181 percent since HARP 2.0 was unveiled, according to White House figures, while Florida and Michigan, which also have high rates of underwater loans, have seen refinance applications increase by 125 percent since the new guidelines were introduced.


New rules ease refinancing


The new changes to the HARP program allow borrowers to refinance no matter how far underwater their mortgage is, replacing the previous ceiling of a 125 percent loan to value ratio (mortgage balance 25 percent greater than home value).


Other changes included eliminating the requirement for new appraisals on many refinance applications, measure to make it easier to obtain a refinance from a different lender than the one currently servicing the loan and refinancing fees have been reduced or eliminated for borrowers looking to shorten the term of their mortgage.


Although the program changes were initially rolled out last fall, they were not fully implemented by most lenders until mid-March, due in large part to the need to upgrade underwriting software used to process refinance applications.


Although the HARP program is primarily aimed at underwater borrowers, it can also be used by homeowners with low equity - less than 20 percent of their home value - to refinance as well. The program is limited to borrowers with mortgages backed by Fannie Mae or Freddie Mac , although the administration is asking Congress to enact further changes that would open the program up to a larger pool of borrowers.


This article was originally published on MortgageLoan.com at: http://www.mortgageloan.com/underwater-refinance-without-harp-9073 .


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Personal Finance , Banking and Loans

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