Roughly 2 million HARP-eligible borrowers who have little to no equity in their homes could reduce their monthly payment if they refinance, according to recent Federal Housing Finance Agency estimates. Yet so far refinancing volume has been shrinking.
Up to 51% of borrowers who refinanced through the HARP program in the last year have previously been turned down, according to a recent loanDepot.com survey.
More than half had been turned down multiple times and 57% were turned down because their home was too far underwater and 17% said they had poor credit when they submitted their HARP application.
Findings suggest lenders must reach out to these underwater HARP-eligible homeowners who probably “assume they can't get help,” said Jim Svinth, chief economist for loanDepot.
HARP’s December 2011 guidelines removed a number of restrictions making refinancing simpler and more inclusive, he said. In addition, some lenders do not require maximum loan-to-value ratios on HARP loans, “allowing even the most underwater homeowners” to access the program.
Most underwater homeowners or 87% of those who were current on mortgage loans owned by Fannie Mae or Freddie Mac and qualified save $1,200 or more annually when they refinance, according to the loanDepot survey. Another 12% are saving $6,000 or more a year.
The survey sample reviewed 253 HARP borrowers who refinanced through loanDepot between Dec. 1, 2012 and Aug. 1, 2013.