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Report: HARP 2.0 Benefits Small Originators Most

Modifications to the Home Affordable Refinance Program (HARP) will likely benefit small loan originators this year, even while refinance share of activity beats market expectations, ""FBR Capital Markets"":http://www.fbr.com/ said in a note Wednesday.


Paul Miller, an analyst with the research arm of the investment bank, wrote that ""HARP 2.0 is exceeding initial expectations for refinance activity and should keep the current mini-refi surge intact throughout the year,"" adding: ""We believe the biggest beneficiaries of the program will be the mortgage originators, especially smaller originators well positioned to pick up market share.""

He attributed the information to D.C. insiders and government contacts, which hold that approximately 3.5 million to 4 million loans will enter the refinance program this year.


FBR Capital Markets estimates that the maximum number of eligible loans for refinance activity could reach as high as 6 million.

He said that a pickup in refinance activity would help anywhere from 900,000 to 1.6 million loans trade up for historically low interest rates.

Miller cited predictions from the ""Mortgage Bankers Association"":http://www.mbaa.org/default.htm that hold that 2012 may see as much as $1 trillion in originations for 2012, up from estimates of $936 million in November.

FBR Capital Markets predicts that the refinance program could expand by $140 billion and $200 billion, with approximately $1.1 trillion to $1.2 trillion in out-performances from ""JPMorgan Chase"":http://www.jpmorganchase.com/corporate/Home/home.htm, ""PNC Financial Services Group"":https://www.pnc.com/webapp/unsec/Homepage.do?siteArea=/PNCCorp/PNC/Home/Personal, ""U.S. Bancorp"":http://www.usbank.com/index.html, and ""Wells Fargo"":https://www.wellsfargo.com/.

""We expect the elevated refinance volume will give these banks a tailwind to non-interest income through 2012,"" Miller said.

With refinance activity up for loans with high loan-to-value (LTV) ratios, he said, ""Fannie Mae"":http://www.fanniemae.com/portal/index.html and ""Freddie Mac"":http://www.freddiemac.com/ will likely continue to refinance loans above 125 percent and try to securitize the loans at a later time.

Expectations remain high for mortgage refinance programs. President Barack Obama recently announced new expansions that would allow homeowners with private-label mortgages to exchange their current fixed rates for loans insured by the ""Federal Housing Administration"":http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/fhahistory.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.

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