Mortgages refinanced under the federal HARP program nearly doubled in the first quarter of the year, following the announcement of new program guidelines last fall.

More than 180,000 mortgages were refinanced through HARP in the first quarter of 2012, compared to 93,000 in the fourth quarter of last year, according to new figures released by the Federal Housing Finance Agency (FHFA). The program accounted for one out of every seven mortgages refinanced during the first three months of this year, according to the FHFA.

80K in March alone

The boost was attributed to changes in the program that removed obstacles to refinancing for borrowers with limited or no home equity. These changes, known collectively as HARP 2.0, include removing the limit on how far underwater borrowers can be on their mortgage and still qualify for a HARP refinance; eliminating or reducing certain fees charged to borrowers; providing financial liability protection for lenders who refinance mortgages originated by other lenders; and eliminating the need for property appraisals in many cases.

The new guidelines were not fully implemented until March, when lenders had access to new underwriting software incorporating the changes. Nearly 80,000 HARP refinances took place that month alone.

The new software allowed borrowers to automatically underwrite HARP refinancings, rather than doing them manually, and was also required for any mortgages refinanced without a new appraisal.

Few deeply underwater

Despite the new guidelines, borrowers who are seriously underwater on their mortgage (owing more than the property is worth) continue to have difficulty refinancing, even under HARP. Only 4,400 of the mortgages refinanced in the first quarter of the year had loan-to-value ratios of greater than 125 percent, the previous limit for mortgages refinanced through HARP.

Approximately one-fourth of all mortgages refinanced through HARP in the first quarter of 2012 had loan-to-value ratios of greater than 105 percent. The rest were mortgages with ratios between 80 percent and 105 percent, suggesting that the greatest beneficiaries of the program were low-equity homeowners or those who were only slightly underwater.

Low rates also boost non-HARP refis

The 180,000 HARP refinances in the first quarter of the year were a record for the program, which was established in early 2009. The increase in HARP refinances corresponded to a general increase in mortgage refinancing driven by record low mortgage interest rates.

HARP stands for the Home Affordable Refinance Program, a federal initiative to enable homeowners with little or no home equity to refinance their mortgages at the low rates currently available. To qualify, borrowers must either be underwater on their mortgage or have less than 20 percent positive equity, be current on their mortgage payments and have missed no more than one payment in the last 12 months. The program is limited to mortgages backed by Fannie Mae or Freddie Mac.

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Published on June 4, 2012