The New HARP : Breaking Down The Revamped Program’s First Wave Of New Applicants
The U.S. government announced its new HARP program last week and the American Public is ecstatic. The new HARP Refinance is the loan program for which they’ve been waiting since 2007.
Read more about the new HARP Refinance program here.
What follows is an analysis of the first 500 inbound HARP Refinance mortgage rate requests via Rate Quote Widget. The data is self-reported by applicants, and it gives us a pretty clear idea of whether the new HARP Refinance will hit its target market.
The American Public Jumped On The New HARP News
The new HARP program was announced Monday, October 24, with the Wall Street Journal’s Nick Timiraos publishing shortly after midnight.
As the story was shared online, the number of HARP refinance queries spiked, peaking between 12:00 PM – 4:00 PM ET Monday, October 24. There was a similar spike the following morning, likely the result of the HARP news appearing in print.
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“Unlimited Loan-To-Values” Are A Boon To U.S. Families
The current HARP program allows for loan-to-values of up to 125 percent but, for most homeowners, the accompanying loan fees were cost-prohibitive. The new HARP program cuts down on loan costs, which allows the program to reach more families nationwide.
The new HARP program also allows for unlimited loan-to-values.
40% of HARP applicants have a loan-to-value in excess of 125 percent with many self-reporting LTVs of 200% or more.
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A HARP Refinance May Lower Your Rate 2% Or More
Homeowners who have lost home equity have been unable to refinance their respective homes as mortgage rates have dropped. Some have low-rate ARMs. Many more appear to have high-rate fixed rate mortgages — some as high as 8%.
Assuming that the new HARP Refinance allows for a 200 basis point mortgage rate reduction (i.e. 2 percent off the rate), a homeowner with a $ 200,000 home loan stands to save $ 3,100 annually, at least.
Multiply these savings by number of families now eligible for HARP and it’s a huge economic stimulus.
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HARP Refinances Led By California, Florida
California’s homeowners are asking for HARP Refinance mortgage rates more often than homeowners of other states, with Florida as a close second. Other states with high numbers of queries include Arizona, Georgia and Illinois.
In comparing the states, however, it’s notable that most queries are for rates on single-family, primary residences. This tells us that the HARP program will be helping the ordinary, everyday homeowner as compared to investors or owners of vacation property.
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California’s Homeowners Have The Least To Gain
Although California’s homeowners have shown the greatest interest in the HARP Refinance program, they’re not the ones who can benefit the most. Applicants in Utah and Texas hold that distinction, followed by East Coast states like South Carolina, Virginia and Pennsylvania.
This occurs because of local mortgage pricing customs.
On the West Coast, loan originators often charge 1 discount point with every mortgage. Discount Points are loan fees equal to 1% of your loan size. They get you access to slightly lower mortgage rates. By contrast, on the East Coast, Discount Points are rarely charged. This results in fewer closing costs, but higher mortgage rates.
Therefore, as we look at the median interest rate for each state, it becomes clear why the HARP Refinance applicants from West Coast states have lower median mortgage rates than those from the East and Midwest — it’s because of Discount Points.
All HARP homeowners, however, should benefit from today’s lower rates.
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Unlimited LTVs Help Homeowners In Nevada, Arizona
The most celebrated change in the new HARP Refinance program is its waiver of loan-to-value measurements. Under the new HARP guidelines, appraisals are unnecessary except in rare cases. If your home is underwater, that’s okay.
If your home is really underwater, that’s okay, too.
There are no LTV restrictions in the new HARP program. For residents of Nevada and Arizona, this is excellent news; HARP Refinance applicants homes in those states have self-reported LTVs north of 200%.
Even in states like Ohio and Tennessee, this is good news. Home values have not dropped as in, say, Florida, but values are down, It’s made refinancing impractical for large groups of people and with the new HARP Refinance, more homeowners are eligible.
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More Refinances Means More Economic Growth
Refinancing households are good for the economy. All 3 types of refis bring economic benefit.
- Cash-out refinances pay down debts, buy “things” such as cars or college, and/or finance job-creating home construction projects
- Term-reduction loans are when families switch from a 30-year mortgage to 15-year mortgage, reducing long-term interest costs
- Basic rate-and-term refinances lower monthly mortgage payments, freeing up household cash for saving and/or spending
The HARP Refinance program was rebuilt with a nod to these three loan types. Not all households will be HARP-eligible with the new loan guidelines, but many more will.
HARP II Features Unlimited LTV, Support For Second Mortgages
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