Modifications in line for the Home Affordable Refinance Program (HARP) from the Obama administration will buoy homeowners with negative equity and origination markets, but field few other benefits for investors in mortgage-backed securities, according to a new outlook.
[IMAGE]Analytics provider ""CoreLogic"":http://www.corelogic.com/ released a statement Monday demarcating HARP's benefits and problem areas, skewering assertions that the program will alleviate a chronic lack of demand and showing that economic troubles may persist despite government assistance.
HARP 2.0 will include a lift for the 125-percent loan-to-value ratio cap for loans, unspecific warranty relief for lenders participating in the refinance program, and an extension for HARP that will allow it to run until 2013.
A spokesperson for CoreLogic could not be immediately reached for comment.
The company said that ""Fannie Mae"":http://www.fanniemae.com/portal/index.html and ""Freddie Mac"":http://www.freddiemac.com/ would likely benefit from any refinance surge, as homeowners with lower interest rates for their government-backed loans
[COLUMN_BREAK]would likely decrease their opportunities for default. Fewer delinquencies would in turn help shore up the GSEs' balance sheets.
The mortgage origination market would see a bevy of benefits, estimating that some 2 million refinance transactions could potentially create $350 billion in new originations, much of it over 2012. The caveat: a bump in mortgage rates could ""dampen"" the results, according to CoreLogic.
The company described savings for homeowners as ""a significant economic stimulus on the order of several billion dollars"" if 2 million borrowers refinance at today's record-low mortgage rates. The winners in this scenario: savings accounts.
On the other hand, investors in the GSEs' mortgage-backed securities will see some fallout from any refinance boom, as their prepayment speeds leap ahead for higher-coupon financial products.
And while the economy stands to benefit from HARP, the housing market will largely miss the boat, with CoreLogic forecasting that a refinance surge is unlikely to slash strategic defaults or assist underwater homeowners by reducing their principal payments.
The final word?
""Time will reveal the true impacts of HARP 2.0, but it is certain that many more borrowers will benefit than would have otherwise,"" the company said in a statement. ""The impacts will be targeted to housing markets and local economies that are the hardest hit by the housing collapse, as these are the markets with the largest shares of insufficient and negative equity borrowers.""