Arizona Loan Modifications & Refinances Drop as Home Values Rise
The Home Affordable Refinance Program (HARP) recently released their 2012 mortgage queries figures, showing the dominance of several states in the market as housing markets continue their slow improvement. The top state for refinance requests, California, accounted for 18.5 percent of all requests, while Florida was close behind with 14.8 percent. Arizona, meanwhile, totaled 6.2 percent of all queries, and altogether, the top 10 states made up two-thirds of all HARP activity.
HARP activity was up last year as the company renovated its services. Over a million homeowners took advantage of the “underwater mortgage program” introduced by the government to provide financial relief to mortgage holders by loan modification in the way of decreasing payment amounts and interest.
This government housing initiative is the backbone of the Home Affordable Refinance Program, which is an economic stimulus plan that was launched in 2009 as an outlying component of the Financial Stability Plan of 2009. It was created to fix the ongoing housing crisis at the time; specifically, to help homeowners who were not able to refinance their homes because of sharply decreasing home values. Through HARP, homeowners whose homes were losing value were able to refinance at the same low interest rate that everyone else could.
Savings with HARP were estimated to be, on average, $3,000 per household, and housing officials were hoping that the savings would increase consumer spending and therefore give the economy the boost it needed. The only problem with this was that far less people were using HARP than initially predicted. Of the 7 million household goal, only 1 million households had used it, which caused results to be minimal and the program to not have nearly the effect as previously predicted.
To change this, government officials went back to the drawing board and came up with two refinements. The first was an unlimited loan-to-value, a change to the original program which capped LTV at 125%. This was designed to make more homeowners eligible in states such as Arizona and Nevada that were hit the hardest by the housing crisis and originally considered too underwater to make use of this program.
The second was a legal inclusion that was intended to encourage more lenders to take part in the program: lenders underwriting HARP loans could not be held accountable for errors or fraud occurring on the original mortgage. This means that one lender could HARP-refinance a mortgage originally written by a different lender without being held accountable for mistakes made on the original mortgage. Under the old program, both lenders would share liability. This also allowed homeowners to work with a new lender if they were dissatisfied with their old one.
Thankfully, HARP 2 has been successful, seeing the same number of mortgages being closed in 2012 than were closed in 2009-2011 combined.
The Rate Quote Widget, which tracks the number of HARP refinance requests made, has found that over 40,000 requests have been submitted after the launch of HARP 2. Overall, the data shows that the states with the greatest number of queries were, on average, the states with the greatest home value depreciation beginning in the middle of last decade.
The top 2 states, California and Florida, made up a combined 33.3 percent of all HARP queries that were processed last year. For all mathematicians out there, that is a nearly even one-third of all queries. However, this makes sense – not only are these states among the most populated, but they are ones that have been hit the hardest by the housing market, and continue to travel a slow path toward recovery. Meanwhile, Georgia and Arizona loan modifications made up just over 6 percent, while Illinois, Michigan, Virginia, Nevada, Maryland and Washington all made up between 3 and 5 percent.
Meanwhile, five states – Alaska, North Dakota, South Dakota, Vermont, and Wyoming – were responsible for less than one-tenth of a percent of last year’s HARP mortgage refinancing requests. With small populations to begin with, this data shows the little-to-no effect that the housing crisis had on these states.
For the most part, home values in each of the top 10 states steadily increased throughout last year. However, certain states, including Arizona, saw higher home value increases, which correlated with a larger decrease in HARP queries. The trend speaks for itself: in January 2012, 8.9 percent of queries came from Arizona, but in December 2012, only 4.2 percent of all queries came from Arizona.
This is indeed a positive sign for the housing market growth in Arizona, however. As the market continues to improve, less people are in dire need of critical mortgage refinancing help.
If you have failed to get a loan modification under HARP and would like to know your other options, please contact me at 602-741-1602 for a private consultation.
Tracy (G+) is an Arizona Short Sale Realtor, Investor, Rehabber, and Foreclosure Expert.
She also is an avid blogger, vlogger, contributor to the Bigger Pockets Blog, and consultant on all things Arizona Foreclosures.