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The Home Affordable Refinance Program (HARP): A Matter of Missed Expectations

Posted on Tuesday, October 25, 2011

The news is out on the Home Affordable Refinance Program (HARP) and although we are sure the new program is well intended it is unlikely to help the Naples Florida real estate market.  So what is going on here?

In Naples we were looking for something to address either the foreclosed real estate property inventory, short (“upside down”) inventories or the uncertainty around “shadow” inventory – and HARP is not designed for these actions.  HARP is a good program don’t get us wrong but it is unlikely to help the national housing and real estate market.  Why?

First let’s look at the attributes of the HARP program and how it may play into naples real estate. According to Florida REALTORS, “HARP is the only refinance program that enables borrowers who owe more than their home is worth to take advantage of low interest rates and other refinancing benefits. The program is offered to borrowers whose loans were sold to Fannie Mae and Freddie Mac on or before May 31, 2009, with current loan-to-value (LTV) ratios above 80 percent.”

Ok, sounds like a good program, BUT it only applies to folks not in foreclosure, will not help short positions, and it does not help a bank with shadow inventory issues, much. It does help out folks obtain lower rates and it makes the application process easier – good things. It may also help folks avoid sliding into a worse situation since their mortgage payments will be lower – also a good thing.

So what went wrong? Expectations. Many of us were hoping for a program to hit the foreclosed, short and shadow naples real estate inventories head on. A further reduction in supply would support and boost prices. Furthermore this “shadow” thing creates uncertainty and we know the Naples market, in fact all markets, tend to  dislike uncertainty. The problem remains the likely solutions to the inventory problems are too expensive and as a result we are left to fix this mess the old fashion way – we let demand and growth eat up the supply. This sometimes long and tough process will work, in fact looking at real estate in real estate in Florida we see inventories now less than one year in Naples – and we did it the tough way – reducing prices, taking the hit, and selling it down.

So HARP may actually be a good program for the targeted audience of homeowners above 80% LTV looking to take advantage of low rates – OK, but it missed our wishful thinking of inventory reductions.  Time to get back to work.

Those are our thoughts – tell us what you thinking