It's gotten a lot easier to refinance an underwater mortgage through HARP.

Frustrated homeowners who were unable to get their underwater mortgages refinanced during the federal program's first two and a half years are finding far greater success in 2012. More than 206,000 negative equity mortgages have been refinanced through HARP in 2012, over two-thirds of the program's entire total since it was launched in spring 2009.

That figure includes some 92,000 homeowners with loan-to-value ratios exceeding 125 percent (mortgage debt at least 25 percent greater than their home value), all of whom refinanced since the first of the year. Nearly all of those were refinanced in just two months, June and July, after restrictions on such loans were relaxed.

That's according to new figures from Federal Housing Finance Agency, which released its July Refinance Report on Friday.

New HARP rules credited

The jump in underwater refinancing is largely attributed to several HARP rule changes that went into effect this year. First, a cap on how far underwater a mortgage could be and still qualify for the program was lifted, allowing borrowers with loan-to-value ratios exceeding 125 percent to qualify for the first time.

Second, lenders refinancing mortgages under the program were granted immunity for underwriting errors made by the original lender, making banks more willing to refinance other lenders underwater loans. Finally, some of the fees charged to certain borrowers were eliminated, which made refinancing more financially attractive.

Overall, some 519,000 mortgages were refinanced through HARP during the first seven months of 2012, more than one-thirds of the 1.54 million refinanced since the program began.

Big increase in underwater refinancing

Although the popular perception of HARP, the Home Affordable Refinance Program, has always been as a program to help negative-equity homeowners refinance, in reality the program's biggest impact has been among low-equity borrowers. Since the program's inception, some 1.24 million refinances performed under the program - about four out of five - were for mortgages with debt-to-income ratios between 80 percent and 105 percent.

In fact, prior to 2012, less than 10 percent of all HARP refinances were for mortgages with debt-to-income ratios above 105 percent - the mark unofficially used to designate underwater loans in program statistics - and none above 125 percent. So far this year, nearly 40 percent of all HARP refinances have been underwater mortgages, with nearly one-in-five more than 25 percent underwater.

Published on June 3, 2014