HARP 2.0 Continues to Progress Throughout the Industry

As the new version of the ""Home Affordable Refinance Program"":www.makinghomeaffordable.gov/programs/lower-rates/.../harp.aspx takes effect, lenders large and small are joining the government's effort to boost assistance to underwater homeowners. HARP 2.0, which went into implementation on December 1, has already garnered support from the country's four major financial institutions and companies like ""United Wholesale Mortgage"":www.uwmco.com/.

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To start the fourth-quarter of the year, ""Bank of America Corp."":https://www.bankofamerica.com/, ""JPMorgan Chase & Co."":www.jpmorganchase.com/, ""Citigroup, Inc."":www.citigroup.com/, and ""Wells Fargo & Company"":https://www.wellsfargo.com/ each confirmed their commitment to the initiative. The banks cited the ""cross-servicing refinancing"" components as one of the key measures within HARP 2.0, and Chase informed investors that the updated guidelines could save its customers as much as $2,500 per year.

The company went on to explain to those invested that the rep and warranty waiver under the cross-servicing provisions would relieve the new lender from assuming responsibility for any underwriting deficiencies, and Chase also elaborated on the program's replacement plan, which lets adjustable-rate and interest-only loans with standard fixed interest rates to be replaced by HARP.

Both Citi and Wells Fargo weighed in with their support for HARP 2.0, with each company issuing an affirmative statement welcoming the updates. Wells Fargo's spokesperson, Veronica Clemons, expressed the entity's tentative forward progress under HARP 2.0, noting that the company would like more information on the program, saying, ""it will take us some time ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô depending on the complexity of the guidelines ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô to make the necessary systems changes to begin offering the new enhancements to our customers.""

Meanwhile, BofA released a statement revealing similar sentiment, stating, ""Despite ongoing economic challenges, nearly 90 percent of our customers remain current on their mortgage. HARP helps these homeowners who remain current on their mortgage with options to lower their monthly payment when, otherwise, conventional funding options are limited.""

Smaller companies, including UWM, are quickly getting on board with HARP 2.0, and UWM has already successfully implemented the necessary changes to accommodate the government's enhancements to the plan. UWM's president, Mat Ishbia, said of the company's compliance measures, ""Access to HARP 2.0 provides much needed relief to underwater borrowers who have been making their payments but unable to refinance due to lack of equity in their homes.""

Continuing his commentary, Ishbia added, ""The recent change to HARP is something we wanted to make available to our broker network so they may assist borrowers that they otherwise could not have helped. There are very few lenders that have implemented HARP 2.0 thus far, and we don't expect to see immediate adoption because of the technology, staffing,

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and liquidity implications. At UWM, we are committed to offering our customers the products they need to satisfy marketplace demands and grow their business.""

On Capitol Hill, Fannie Mae ended December with the decision to alleviate the burden on lenders to establish a borrower's ability to repay a loan when utilizing the HARP 2.0 channel. According to Barclays Capital, Fannie chose to make the adjustment following the realization that the ability to pay clause within the updated program was limiting the scope of eligible loans.

As it stands now, Fannie mandates that no debt-to-income evaluation is required for refinancing that occurs under HARP 2.0, provided that the homeowners payments increase by less than 20 percent. The additional changes follow lender push-back against HARP 2.0.

""Barclays"":group.barclays.com/ spoke out on the alterations in a company statement, writing, ""Lenders argue that lack of clarity on what reasonable ability precisely means could expose lenders to indemnification liability in the event that the loan defaults. Though the GSEs (government-sponsored enterprises) have indicated that this clause exists to ensure prudent underwriting judgment and efficient choice between HARP and HAMP, lenders view this as a significant risk.""

Extending the entity's notations on lenders' abilities to underwrite loans solely on payment history and a verbally verified income statement, Barclays added, ""The removal of the subjective 'ability to pay' criteria could result in lenders becoming more comfortable with the potentially lower indemnification liabilities. This could lower the threshold for refinancing loans and lead to a boost in refis.""

Releasing its forecast on the future of HARP 2.0, ""CoreLogic"":www.corelogic.com/ recently predicted who the ""winners"" and ""losers"" would be within the plan. Chiefly, CoreLogic pointed out that, among at risk borrowers, the program's current payment clause would be a significant blockade to the success of HARP 2.0

Mark Fleming, CoreLogic's chief economist, specifically referenced states like Nevada and Florida in the company's survey, stating that in those regions, the GSE portfolio of holdings is several percentage points lower than the national average.

Fleming said, ""It's not surprising that where insufficient and negative equity is concentrated is also where delinquency levels are higher. Therefore, the HARP 2.0 requirement that the borrower must be current reduces eligibility in many of the areas where negative equity presents the biggest impediment to refinancing.""

Continuing his statements, Fleming noted his opinion that HARP 2.0 is a strong positive move for the GSEs and originators. Fleming cited the reduction in default risk inherent for the GSEs, as well as the inevitable rise in origination volume for lenders conducting the refinancing transactions.

However, Fleming was clear with his evaluation of HARP 2.0's ultimate influence on the broader housing market, calling for effects that are likely to be ""neutral."" He also stated that he doesn't believe that there will be much direct and immediate benefit to the markets, regarding borrowers who are already delinquent.

In closing, Fleming summed up the slow national recovery for housing, saying wisely, ""There are no silver bullets that will solve the issues facing the housing and mortgage markets, only solutions that play their small part. In the end, the best solution will be a stronger economy and the passing of time.""