The New and Improved HARP

The Obama administration's Federal Housing Finance Agency announced a new program to help homeowners who have been making timely mortgage payments, but are unable to refinance their homes because the value of the home is less than the value of the loan. The program will protect lenders against underwriting problems, ease the rules on mortgage payment verification, remove the requirement for an appraisal as part of the refinancing process, and waive some fees on shorter term loans.

I don't expect the program will have a huge effect on the economy. But it's estimated that as many as 1 million homeowners might take advantage of this program, so it may have some impact, and the impact could be largest where it's needed most -- in very distressed areas with clusters of homes that are underwater.

Unfortunately, it will take months to put the program into place, so whatever effects it has won't be as immediate as we need, and we won't know the particulars of the program until at least November 15 when more details will be announced making the program difficult to evaluate with any precision.

But it's something, and given the condition of the economy, labor markets, and housing markets, we can use all the help we can get.

Felix Salmon doesn't think "all the help we can get" will be very much:

HARP II is being announced with great fanfare today... Sounds impressive, eh? It is, until you read the official FHFA press release. At which point you learn that

• If you're a homeowner whose mortgage isn't owned or guaranteed by Frannie, you're out of luck.
• If your mortgage was sold to Frannie after May 31, 2009, you're out of luck.
• If you want to get out of negative-equity hell by doing a principal reduction, you're out of luck.
• If your bank doesn't feel like participating, for whatever reason, you're out of luck.

All of which is likely to result in not-very-much, as the FHFA itself concedes:

...our best estimate is that by the end of 2013 HARP refinances may roughly double or more from their current amount but such forward-looking projections are inherently uncertain.

First, by the end of 2013? Never mind mortgage relief now, we'll try and get you mortgage relief in two years' time?...

Most importantly, it doesn't do principal reductions -- if you're underwater when you get your HARP refinance, you'll be underwater afterwards, too. ...

the sad fact is that anything more substantive than this is likely to require Congressional approval, and therefore be a political non-starter between now and November 2012. The government's done almost nothing to address the housing mess, and will continue to do almost nothing for the foreseeable future.