HARP Booms But Banks Shy Away on Disclosures

The HARP 2.0 program finally hit its stride in June as GSE lenders refinanced 126,000 high LTV loans, including 53,750 mortgages with loan-to-value ratios north of 125%.

Loan production under the Home Affordable Refinancing Program nearly doubled from May to June.

Approximately 243,000 Fannie Mae and Freddie Mac loans were refinanced through the program in the second quarter, almost threefold the units done in 2Q of last year.

According to the Federal Housing Financing Agency, HARP refis represent 24% of all refinances in the second quarter.

However, some large lenders are being secretive about their HARP production—as if it were strategically important information that competitors might use. Many publicly traded banks hardly mentioned HARP in their securities filings or investor presentations.

Wells Fargo & Co. noted in an earnings supplement that it originated $131 billion of home loans in 2Q and that 16% were HARP related. But the nation’s largest mortgage lender made no reference to HARP in its quarterly securities filing and offered no dollar volumes.

Bank of America and JPMorgan Chase mentioned HARP several times in their filings, but did not provide any production figures.

In response to an inquiry by this newspaper, B of A revealed that it funded 38,000 HARP loans in the first half, including 26,000 in the second quarter. “More than 25% of our funded HARP loans had LTV ratios greater than 125% in the second quarter,” B of A spokesman Terry Francisco said.

Chase declined to provide such loan data. “Under HARP 2.0, Chase helped thousands of customers take advantage of low interest rates who wouldn’t have previously qualified,” spokeswoman Amy Bonitatibus told NMN. “The demand from customers has exceeded our expectations and we expect high volumes through the end of this year,” she added.

PNC Financial Services disclosed that it originated $7 billion of residential mortgage loans during the first half of this year with HARP loans accounting for 30% of originations.

Nationstar Mortgage of Lewisville, Texas, a fast-growing lender/servicer, originated $1.8 billion of mortgages in the second quarter, including $1.1 billion of HARP loans, according to its CEO Jay Bray.

“We expect to see significant HARP refinancing throughout the remainder of the year,” Bray said during a conference call with investors. In June, Nationstar completed its acquisition of a $63 billion servicing portfolio from Aurora Loan Services. Bray indicated that Aurora loans would “become eligible for refinancing” in the third quarter.

The Federal Housing Finance Agency revised the HARP program late last year, streamlining the process by reducing buyback risk, and eliminating the 125% LTV ceiling. Fannie and Freddie completed implementation of these HARP 2.0 changes in the first quarter.

HARP refinancings with LTVs above 125% continued to lag. However, just 3,000 of these severely underwater loans were refinanced in May. However, Fannie and Freddie started securitizing 125% LTV-plus loans on June 1 with lender/servicers delivering 53,750 by the end of June.

Deutsche Bank managing director Steven Abrahams said the market has shown “very strong demand for HARP MBS.”

And demand for HARP 125% loans, which are securitized in separate pools, also have been strong, according to the managing director for securitization research.

Under the HAMP program, the underwater borrowers can only be refinanced once so they cannot refinance again. “Those pools should show very steady prepayments, which MBS investors value,” Abrahams said.

Refinancings of 125% LTV-plus loans are expected to be heavy in the month ahead.

“We expect to acquire many refinancings with LTV ratios greater than 125% because borrowers were unable to refinance these loans…until changes to HARP were fully implemented until the second quarter,” Fannie said in its second-quarter securities filing.

Meanwhile, the GSE regulator is planning to make more refinements to the HARP 2.0 program. After soliciting feedback from lenders, the FHFA said in a recent letter to Congress that it “identified a few operational adjustments to further simplify this process and increase the number of loans approved for refinancing.”

The FHFA is expected to announce the new changes soon.

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