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Obama’s HARP 2.0 hasn’t achieved lift-off yet

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President Obama recently overhauled his beleaguered mortgage refinancing effort, but it’s unclear whether it will ultimately help change the housing market. Testifying before the Senate Banking Committee this morning, Housing Secretary Shaun Donovan said that some 50,000 loans under the Home Affordable Refinance Program have been finalized, since some of the changes to expand the program went into effect in December, and about 300,000 new applications have been received. Donovan said that he was “encouraged” by the numbers, which he described as higher than expected. But in terms of final loans, at least, the rate of new loans per month appears to be slightly below the average refinancing rate for HARP. Rick Bowmer AP

Between its inception in April 2009 and the third quarter of 2011, HARP has provided about 930,000 loans in total, or about 29,000 per month. Under HARP 2.0, which began to take effect in late December, the rate of new loans has been about 25,000 loans per month, based on Donovan’s numbers. The large volume of new applicants could bump those numbers up significantly in the next few months. But even if all 300,000 applicants received new loans, that’s just a drop in the bucket, according to Chris Mayer, a Columbia real estate finance professor. He points out that there are about 25 million homeowners who could benefit from refinancing — 8 million if you whittle it down to the more distressed homeowners. “If we’re talking about millions, we’re not talking about a program going to make a significant dent in the market,” he said.

However, Donovan pointed out that some of the biggest changes to expand the criteria for HARP take effect this month and in March, which could further accelerate the refinancing rate. Such changes have prodded the bullish predictions about “HARP 2.0”: Moody’s has estimated that as many as 1.6 million additional homeowners could benefit. But there are also some clouds on the horizon as well: Mortgage rates have recently been on the rise, which could put a damper on any potential refinancing boom.

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