The FHFA’s Home Affordable Refinance Program (HARP), which provides borrowers with little or no equity a way to refinance without additional mortgage insurance, is winding down and is scheduled to sunset at the end of this year.
According to the FHFA’s May 2016 Refinance Report released Monday, more than 3.41 million borrowers have refinanced through HARP since the program began in 2009. Ten states have accounted for about 60 percent of those HARP refinances (Florida, Illinois, Ohio, Michigan, Georgia, Pennsylvania, California, New Jersey, Maryland, and New York); as of December 31, 2015, there were an additional 325,295 borrowers with an incentive to refinance through HARP but had not done so.
The FHFA found that borrowers who refinanced through HARP had lower delinquency rates than borrowers were eligible for HARP but had not refinanced through the program. About 14 percent of loans eligible for HARP in June 2009 but not refinanced through the program later became delinquent, compared to just 7.7 percent of loans that refinanced through HARP in June 2009.
For June 2010, about 11.5 percent of eligible borrowers who did not utilize HARP became delinquent, compared to 9.3 percent of HARP refinances during that month.
The delinquency percentages for borrowers who did not refinance with HARP were higher across the board than the percentages for those who did use HARP. For June 2011, the numbers were 7.6 percent for non-HARP borrows and 6.5 percent for HARP refinances; for June 2012, it was 6.5 percent compared to 4.1 percent; for June 2013, it was 5.6 percent compared to 2.3 percent; and for June 2014, it was 4.0 percent compared to 2.3 percent.
Borrowers completed 6,091 refinances through HARP in May, which brought the total since the program’s inception on April 1, 2009, up to 3,412,982. Out of the total HARP refinances, borrowers with LTV ratios greater than 105 percent accounted for 22 percent. Twenty-six percent of HARP refinances for underwater borrowers were for shorter-term 15- and 20-year mortgages, which build equity faster than 30-year mortgages.
Click here to view the entire FHFA May 2016 Refinance Report.