The Home Affordable Refinance Program was created in the wake of the housing market collapse to help distressed borrowers restructure their mortgages into more favorable terms.
Shortly after, a number of real estate experts were unsure as to how effective the initiative would be. According to Paul Ashworth of Capital Economics, though, the impact on the mortgage market has been significant.
"Almost half of mortgage borrowers still don't have the 80 percent in home equity required to qualify for a standard refinancing that would allow them to take advantage of record low mortgage rates," Ashworth wrote. "But that picture will change rapidly if house prices were growing at as much as 10 percent per year. Almost 3.5 million borrowers could exit negative equity over the next 12 months."
The program was recently expanded to include a greater number of borrowers - an update known as HARP 2.0. With 2012 nearly over, mortgage records indicate HARP 2.0 helped between 30,000 and 100,000 underwater borrowers refinance their home loans.
Meanwhile, roughly half of the borrowers who took advantage of the initiative had loan-to-value ratios greater than 105 percent, while a quarter had LTVs above 125 percent. Although underwater borrowers now have a realistic outlet to refinance, negative equity is expected ot be a significant obstacle for the housing market's recovery.
HARP assistance expected to continue
Prior to the results of the recent presidential election, some mortgage experts speculated that the results could spell the end of HARP. During the campaign, challenger Mitt Romney said he would eliminate unnecessary mortgage initiatives, such as HARP, to promote activity in the private sector.
Because the results swung in the opposite direction, and President Barack Obama remained in office, HARP 2.0 is expected to remain in place for the time-being.
However, this doesn't mean the existence of the program is entirely secure. If lawmakers don't come to an agreement regarding to future of the federal budget (known as the fiscal cliff), certain initiatives, including HARP, may have government funding cut.
Although the deadline for the fiscal cliff is quickly approaching, many experts believe legislators will come to an agreement, as failure to do so would cause a significant shock to the financial safety and soundness of consumers and subsequently impact the housing market's recovery.