“The fact that Harp was changed” would concern investors, Schmidt said. “After all, what would stop another revision to Harp to prepay their new security at some point in the future?”
The government created Harp in 2009 to add to its housing programs. The Home Affordable Modification Program, known as Hamp, helps homeowners who have fallen behind on mortgage payments renegotiate loan terms. There’s also Home Affordable Foreclosure Alternatives, or Hafa, to help owners sell homes for less than they owe and escape the remaining debt.
Harp Extended
For Harp, borrowers have to be current on their mortgages. They aren’t required to have the 20 percent equity in their properties lenders typically stipulate for a refinancing. The program was expanded in 2011 to include all government-backed mortgages -- instead of the limit to mortgages 25 percent or less underwater in the first version -- and some fees were lowered. The new version is called Harp 2.0. In May, the deadline for Harp was extended to 2015.
Sen. Jeff Merkley, an Oregon Democrat, has proposed legislation to refinance mortgages held in private-label bonds by setting up a national trust to purchase and refinance loans similar to the Great Depression’s Home Owners’ Loan Corporation that returned a profit to the Treasury after helping 1 million homeowners. The Oregon pilot program, confined to the state’s Multnomah County that includes the state’s capital of Portland, is similar to that proposal though on a smaller scale.
Oregon Model
“There have been many different programs like this discussed at the federal level, but none of them has gotten any traction,” Columbia’s Mayer said. “Oregon may end up being a model for some other states, and Treasury has generally been supportive, but the odds of a program on a national level are fairly low.”
The Oregon refinancing program uses funds from the Hardest Hit Fund, established by Treasury in 2010 to give $7.6 billion to the nation’s capital and 18 states that had price declines of more than 20 percent during the housing bust or had high unemployment during the financial crisis, including California, Arizona, Nevada, Ohio, Illinois, and North and South Carolina.
So far, only about 20 percent has been spent, according to Treasury data. Other states with the funds have shown interest in the Oregon program, and are free to copy it if they wish, said Risotto, the Treasury spokeswoman.
“The terms of the Hardest Hit funds allow participating states to share promising ideas like the Oregon program with each other,” Risotto said. “We’ve helped facilitate some of those conversations.”