HARP 2.0 Refinancing Activity Disappointing

By Sari R. Updated on 9/25/2013

HARP 2.0 has failed to heat up refinancing in March 2012 as prepayment speeds remained well below expert projections.

Prepayment speeds are generally proportional to how fast borrowers refinance existing mortgages, but speeds from March fell short of most estimates even though the HARP 2.0 Program was supposed to significantly boost refinancing activity.

For Fannie Mae, the conditional prepayment rate for 30-year fixed mortgage climbed 4% to 25.8 CPR.  For Freddie Mac, the rate rose  6% to 28.2 CPR.  However, experts were expecting at least a 15% increase in the conditional prepayment rate.

The reason for slower than expected refinancing activity seems to be that certain key factors are still hindering borrowers' participation in the HARP 2 Program. Even though both Fannie and Freddie have updated their automated underwriting system in March, there are still some banks that are not refinancing loans that they do not already service under HARP 2.0.

There are other reasons keeping HARP refinancings still slow in pace. The first reason is that several lenders are placing their own guidelines and requirements for HARP 2.0 on top of those already initiated by the government. Private mortgage insurers also are not fully onboard with parts of HARP, making it harder to push the refinancings forward.

Going forward, however, we should see an increase in HARP 2.0 refinance activity.