You read that title correctly.
An estimated 2.7 million American households could refinance to today’s mortgage rates (which are near historic lows, in case you haven’t been paying attention) through the government’s HARP program. And they can do it even if they owe more money than their home is worth. Up to 200%. But they aren’t. And we don’t know why.
Why don’t they want to lower their mortgage payment?
Why don’t they want to shorten the term of their loan?
Why don’t they want to save thousands in mortgage interest?
We wish we knew, because then we could reach out to them and explain why they absolutely should take advantage of HARP while it’s still around. Which brings up some good news for American homeowners. HARP has been extended through 2015. That’s a good thing. The bad thing is that mortgage rates most likely won’t stay as low as they are for very long. At some point, once rates rise, the ability to save money with HARP may be diminished.
Jordan Fylonenko recently met with Quicken Loans Chief Economist Bob Walters to discuss HARP and what’s going on with the millions of folks who haven’t taken advantage of it.
The FHFA’s announcement to extend the HARP deadline to 2015 is much needed for the estimated 2.7 million underwater homeowners who are eligible and still able to benefit by refinancing. Unfortunately, a too-good-to-be-true perception coupled with long lines to refinance and repeated “no’s” from lenders who are not utilizing HARP to its fullest extent have left many disgruntled to enter another arduous loan process. But for those homeowners needing a personal stimulus, picking up the phone again is well worth it.
The average savings from a HARP refinance is around $200 a month with an average rate reduction of 1.75%, resulting in $2,400 savings per closed loan per year and $74,000 per lifetime (assuming a 30-year mortgage). The potential stimulus for the economy is even more significant, reaching up to $6.5 billion ($2,400 in savings a year per consumer x 2.7 million consumers).
These savings are more than just numbers on a spreadsheet. A Quicken Loans client and active duty Air Force recruiter from Sacramento, CA, was able to cut $763 off his monthly payment for his investment property and lowered his rate down by more than a point through HARP. This was after his original lender told him they couldn’t help.
Another Quicken Loans HARP client from North Brunswick, NJ, was able to save $387 on his monthly payment and lower his rate by more than a point to 3.85%.
In a monthly video series, Markets and Musings, Quicken Loans Chief Economist sat down to discuss some of the recent changes that have opened up HARP to more underwater homeowners.