At least one insider finds the anticipated extension of the Home Affordable Refinance Program “may not be as bad” as expected for the residential mortgage market.
Based on hints given by President Obama during his Saturday morning address, SVP of policy research at Keefe, Bruyette & Woods Brian Gardner says the Obama Administration may announce the extension of
In his view judging from the administration’s rhetoric so far indicates HARP could be extended another year.
However, hopes to also have
And the reasons are obvious. HARP would be extended into the private label loan market only if the option receives congressional approval, which is quite unlikely, he says.
Earlier this year the U.S. Department of Treasury approved a small pilot program in Oregon that would allow private-label loans to refinance through a program similar to HARP, according to Fitch Ratings.
Nonetheless, analysts noted that “due to congressional resistance, an expansion of HARP to include private-label loans does not seem near.”
Fitch also reported that such market test makes sense since the total number of agency and private-label borrowers with negative equity is roughly one million and despite price improvements negative equity still is a significant credit risk in securitized private-label residential mortgage loans.
Another HARP expansion approach that is equally unlikely, says Gardner, is diverting to HARP unused Home Affordable Modification Program funds, which the Administration seems to have already rejected.
In an effort to continue to provide meaningful solutions to the housing crisis, effective June 1, 2012, the Obama Administration expanded the eligibility criteria to include homeowners who previously did not qualify because their debt-to-income ratio was 31% or lower, as well as to homeowners who previously received a HAMP modification but defaulted in their payments, and owners of secondary residences who are making these properties available for rent. Yet, unemployed homeowners are not HAMP eligible.
