HARP 2.0 increases refinances

The revamped version of the Home Affordable Refinance Program (known as HARP 2.0) is up and running, nearly doubling the number of refinances it made the first quarter of 2012 –180,000 nationwide – compared to 93,000 in the fourth quarter of 2011.

HARP 2.0’s main revision was its removal of the 125% loan-to-value (LTV) cap. This means those seriously underwater homeowners whose mortgages are owned by Fannie MaeA government-sponsored entity operating in the secondary mortgage market. or Freddie Mac (collectively FrannieA collective term for Fannie Mae and Freddie Mac.) may participate in the program and refinance into a low interest rate. Since the beginning of 2012, 4,400 of these refinances nationally were made for homes with LTVs greater than 125% – equal to roughly 2.5% of HARP 2.0 refinances in the first quarter.

Critics suggest Big Banks are profiting most from the increased refinances, as most lenders will only consider a refinance on an underwater home if they already service the loan due to the risk FrannieA collective term for Fannie Mae and Freddie Mac. will put back faulty loans, limiting homeowners to refinancing with their existing lender. Thus, lenders are charging higher rates and fees due to the lack of competition, mainly benefiting Big Banks who already own or service the bulk of underwater mortgages.