February 21, 2012

Latest Projections for HARP 2 Underwater Refi Program

February 21, 2012

Latest Projections for HARP 2 Underwater Refi Program

Folks continue talking about HARP 2 but I for one am not convinced anyone knows quite what to say—but HARP 2 rolls on. Matt Lind with STRATMOR writes:

Based on three HARP 2 workshops STRATMOR has recently conducted with lenders, it appears that large aggregators have not yet decided whether or not to purchase HARP 2 loans originated by their correspondents [aka mortgage banks], including loans that they (the aggregators) are currently servicing.

Despite a tremendous surge of HARP 2 inquiries from existing borrowers, the attitude of some aggregators seems to be that their existing borrowers—especially those with high LTV loans—will have no other place to go and so ‘we’ll get to them when we get to them.’

If this attitude persists, then non-servicing correspondents—especially those lenders without Agency [aka Fannie/Freddie] approvals—will be faced with few outlets into which to deliver HARP 2 loans; in effect, making HARP 2 a “big servicer” refinance program.

With purchase originations remaining anemic, this could make 2012-2013 unnecessarily tough years for mid-size and smaller lenders, who otherwise could use readily available database marketing services to receive timely and cost-effective HARP 2-eligble leads if they had outlets for HARP 2 loans.

We think, however, that the large lenders will likely succumb to external pressures to open up HARP 2 originations to their wholesale channels. Making their existing, good payment-history borrowers wait months before starting an in-house refinance will delay such borrowers the substantial payment reductions of a HARP 2 refinance and both draw and deserve public criticism.

And don’t forget that most non-depository mortgage banks use warehouse lines to fund loans. So far, I haven’t heard of any warehouse lenders anxious to extend monies on 125% LTV (and higher) loans.

On the other hand, I saw this from a research firm on Wall Street:

It’s looking likely that small loan originators will benefit from modifications, even as refinance share of activity is beating market expectations. HARP 2.0 refinancing activity appears to be exceeding earlier projections, with analysts predicting that the surge will continue throughout 2012, and smaller originators will be ideally positioned to pick up market share. The latest figures from DC think tanks suggest that up to 6 million loans could become eligible for refinance activity and that 3.5 to 4 million loans will enter HARP 2.0. If those numbers hold true, 900,000 to 1.6 million loans could trade up for rock-bottom interest rates. Big banks stand to benefit as well, as HARP could expand by $140 to $200 billion, with $1.1 to $1.2 trillion in out-performances from Chase, Wells, PNC Financial Services, and U.S. Bancorp.

Further Reference:
Qualifying Checklist: HARP 2 Refis No Matter How Far Underwater
HARP 2 Notes for lenders & MBS investors
Official HARP Consumer Website