HARP Extension to 2015 will Keep QE3 Afloat

Housingwire, Christina Mlynski

With the Home Affordable Refinance Program receiving an expiration date of 2015, the Federal Reserve’s agency mortgage-backed securities purchases are expected to last longer than the market initially anticipated.

In effect, extending HARP reduces the potential for lower gross MBS issuance in 2014 and 2015, according to Bank of America Merrill Lynch’s ($11.66 0.22%) latest report.

The extension happened for various reasons including the roughly 2 million HARP-eligible borrowers remaining, suggesting such borrowers could potentially benefit from HARP.

"Although we anticipate that HARP burnout will intensify in 2014 and 2015, our estimate that there are as many as 2 million remaining HARP eligible borrowers suggests only a modest annualized reduction in the pace of HARP refinancings in 2014 and 2015 relative to the 2012 pace," said Chris Flanagan and Matthew Carr, MBS strategists for BofAML.

From the fourth quarter of 2011 through the first quarter of 2013, roughly 1.375 million borrowers have refinanced through HARP – already hitting and even exceeding the Fed’s target of 'a million borrowers or so.'

At the same time, home prices are up by 11.6% from December 2011 through February 2013.

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