A Barclays Capital analyst says the Federal Housing Finance Agency's (FHFA) estimate as to the number of borrowers to be helped by the expanded federal refinance program may be on the low side.
In its self-described ‘best guess’ estimate, the FHFA says the broadened Home Affordable Refinance Program (HARP) could eventually double the number of borrowers who have received HARP assistance to date. As of the end of August, almost 894,000 borrowers had refinanced through the program.
Calling particular attention to the potentially "substantial effect of putback waivers" – Phase II of HARP relieves refinancing lenders of credit-related representations and warrants tied to old loans – Barclays analyst Nicholas Strand wrote Monday that there are approximately 1.9 million loans that can be directly eligible for refinancing.
That number contains 1.65 million loans originated before June 2009 that have loan-to-value (LTV) ratios of between 80% and 125%, have no mortgage insurance, have six months of clean payment history and a weighted average coupon above 5%. The 1.9 million figure also factors in approximately 240,000 loans that are above 125% LTV and satisfy other HARP criteria.
Moreover, there are another 1.2 million loans that have private mortgage insurance, and a subsection of these loans should be able to refinance, Strand wrote.
Altogether, that brings Strand's overall eligibility projections to between 1.9 million and 3.1 million borrowers.
"The administration's estimates are much lower than those numbers," Strand wrote. "We believe the overall number could be higher, given the substantial effect of putback waivers."