Posted by Bear900/CA on 1/26/12 4:54pm
Msg #409955

Question Re HARP 2.0 "What makes May 31, 2009 so special?”

Question from Reader on my last post: “In my case, HARP 2 will not help. I refinanced on 6/30/2009 therefore due to this fact I do not qualify. My question is why is the date qualifier in the program? What makes May 31, 2009 so special?”

Good question and though I may not have the exact answer I believe I can touch on it or at least get close.

I think the short answer has to do with the timing of the economic collapse, implementation of TARP, the timing of change in Administrations, and budget allocation for the various programs. Maybe others can elucidate on this more so. Sorry that you missed the date by just one month!

While it’s not impossible that the government could extend the cut-off date beyond May 31, 2009 (they have done stranger things), in my opinion it’s highly doubtful as they left the date intact with the expansion of HARP to HARP 2.0. If you know recent history you may see some other reasons why.

First, it may be good to review how the H.A.R.P program came into existence and how the date was pulled out of thin air or so it seems. Follow the bouncing timeline:

Recall that in the height of the economic meltdown the 2008 Emergency Economic Stabilization Act & Troubled Asset Relief Program (TARP) came into existence under the Bush administration. That may be old news, but you can very well ask the question, “Why did they pick autumn of 2008 to start this program?” when the financial system crashed well before and continues well after.

One answer is that it took an act of Congress on Oct 3, 2008. The other is budget, or money allocated for various TARP programs. While part of the TARP money was supposed to be used to buy “toxic assets”, i.e. mortgage backed securities (MBS) it was instead used to partially nationalize the banking industry and prop up the TBTF’s (Too Big to Fails). The result was the government at one time owned approximately 75% of the big bank assets and banks stopped lending among themselves. This left the mortgage and housing industry dangling by a very thin thread. It’s not a coincidence that the Federal government took over Fannie and Freddie in September of ’08.

Enter the Obama administration on January of ‘09. Ahah! I bet the order of events is starting to make some sense now. Trust me this will build up to May 31, 2009 our date in question.

On Feb 18, 2009 President Obama announced his Making Home Affordable program (MHA) which birthed the HAMP (loan modification) and HARP (loan refi) programs. The treasury allotted up to $50 billion of TARP funds toward the program. These funds were for troubled loans in the past, not the future. Otherwise there would be no end to TARP.

The date for starting the HARP program was originally set to Jan 1, 2009 and was postponed to Mar 1 (no doubt to get the MHA in place under TARP) and then finally to May 31 of 2009. But you can see where it could have started five months earlier and left out mortgage holders during that time frame. So, some have benefited by the delay.

What happened during those five months? You might liken it to what is happening now. The GSE’s had to come up with new guidelines; underwriting software had to be updated, lenders had to make adjustments and so on. The government has a good record for delaying implementation. In this case it helped out a few extra homeowners who took out risky mortgages at the beginning of 2009, but at some point there has to be a ‘start and stop date’.

Here’s a good site to see the programs that came into effect under the TARP program.

http://www.treasury.gov/initiatives/financial-stability/programs/Pages/default.aspx