The government's Home Affordable Refinance Program (HARP) posted its second-strongest quarter on record during the first three months of the year, enabling 130,000 homeowners with limited or no equity to refinance their mortgages.

That represents over 17 percent of the 752,000 mortgages refinanced under the program since it was initiated in March 2009. The total is down slightly from the record 142,000 mortgages refinanced during the last quarter of 2010, when 30-year interest rates fell to their lowest point in 50 years.

The program, which has struggled for much of its history, has seen considerably stronger demand over the past seven months, exceeding 40,000 mortgage refinances every month since September, hitting an all-time high of 57,000 in December. Prior to that, monthly refinances had been running in the upper 20s to low 30s.

The program is the lesser-known counterpart to the government's Home Affordable Modification Program (HAMP) mortgage modification initiative. Whereas HAMP is targeted at homeowners who may be falling behind on their mortgage payments, HARP is for homeowners with good credit who'd like to take advantage of lower interest rates, but have difficulty refinancing because of a lack of home equity.

HARP, which is limited to borrowers with a Fannie Mae or Freddie Mac-backed mortgage, allows homeowners to refinance their mortgage and any home equity loans at up to 125 percent of their current home value, enabling underwater and low-equity borrowers to refinance.

About one in seven homeowners who refinanced through HARP in the first quarter of the year were in the 105-125 percent loan-to-value range, meaning they were at least partly underwater on their loan or loans. The other HARP refinances were in the 80-105 percent loan-to-value range, ranging from limited to neutral equity to slightly underwater.

The 130,000 HARP refinances during the first quarter of the year account for a little less than 13 percent of the 1,016,000 Fannie Mae and Freddie Mac mortgages refinanced during the same period. With 752,000 refinances performed to date and the program scheduled to expire in June 2011, HARP still remains well short of its original projections of helping 4-5 million limited equity homeowners refinance to low-interest, fixed-rate mortgages.

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Published on October 7, 2008