12:27 EST / Feb 12
By Ian McKendry
WASHINGTON (MNI) – Housing and Urban Development Secretary Shaun Donovan Wednesday called for an expansion of the Home Affordable Refinance Program, a divergence from what had been assumed was the Obama administration’s stance that expanding the program would do more harm than good.
“I think we should continue to look at everything we are doing in marketing it without legislation, but I think this is something we ought to continue to look at on a legislative front,” Donovan said referencing the HARP program at a press conference sponsored by Politico.
The HARP program allows borrowers with an outstanding mortgage guaranteed by Fannie Mae and Freddie Mac, that is 80% or more than the value of their home – but are current on their mortgage payments – to refinance as long as the loan was made before May 31, 2009.
It was once thought that an extension of the date beyond the May 31, 2009 cut-off was an odds-on favorite after Mel Watt, who’s track record suggests he may have more affordable housing goals than his predecessor, was confirmed as the Director of the Federal Housing Finance Agency.
However, during a speech to an industry group in January, Counselor to the Treasury Secretary for Housing Finance Michael Stegman said that “Treasury believes there should be no change in the HARP eligibility date,” and that “very few homeowners whose loans were originated after the cut-off date are underwater and advancing the date would do more harm than good by prolonging market and investor uncertainties.”
Those comments caught the mortgage-backed securities market by surprise and caused analysts to reverse course, with many seeing an extension of the date as less likely.
“The odds of a HARP date change were around 60%, but have now fallen to roughly 10% or so,” mortgage analysts at JPMorgan wrote in a research note to clients following Stegman’s comments. However, they added that “in a rally, those odds would increase thanks to larger potential borrower savings.”
During the press conference Wednesday, Donovan also referenced the rising interest rate environment, saying “obviously it depends on interest rates and exactly where they go to see if an extension would make sense, but fundamentally I think there is more we can do more on refinancing that would help.”
Donovan added that “this is something that we continue to look at, I think there is legislation that would be helpful on this front, leaving aside the deadline – that Fannie and Freddie can’t do on their own – to broaden eligibility, but this is an area we ought to continue to push on.”
The latest Refinancing Report from the Federal Housing Finance Agency showed that HARP refinancing continued to drop in November – a result of higher interest rates and higher home prices. However, the percentage of HARP refinances relative to total refinances by Fannie Mae and Freddie Mac have continued to hover around 20%.
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