by Calculated Risk on 10/24/2011 07:38:00 PM

Many of the reviews of the HARP changes are pretty negative. As an example, Felix Salmon wrote: Obama’s pathetic refinancing initiative. But I think Felix was expecting too much.

This program only applies to Fannie and Freddie loans because the U.S. taxpayer already has the credit risk for these loans. Felix seemed to expect more when he wrote: "If you’re a homeowner whose mortgage isn’t owned or guaranteed by Frannie, you’re out of luck."

What this program does do is remove many of the stumbling blocks to refinancing Fannie and Freddie loans (eliminate reps and warrants, reduce or eliminate fees, automatic 2nd subordination, minimal qualifying). These were all deal killers for HARP, and hopefully these changes will smooth the refinance road.

As far as non-GSE loans, Jon Prior at HousingWire mentioned some of the comments from the press conference today about the pending mortgage settlement:

As part of the negotiations, the AGs are working to force servicers to refinance current borrowers into lower-rate mortgages.

"The settlement negotiation is also going to be focused on significantly accelerating the reduction of principal," Department of Housing and Urban Development Secretary Shaun Donovan said Monday.

This sounds like a HARP type refinance program for non-GSE loans (the "accelerating the reduction of principal" is one of the goals of HARP by refinancing into shorter term mortgages).

And there is more to come. I expect an announcement in the next month or two of some sort of program for Fannie/Freddie/FHA REO disposition. This would probably involve selling REOs in bulk to investors and include some sort of plan to rent them to the current occupants.

Put those three programs together: HARP refinance for GSE loans, a HARP like refinance program as part of the mortgage settlement for many non-GSE loans, and and an REO dispositions program that keeps many occupants in place as renters and I think that will help.

This doesn't solve all of the housing problems. But the refinance programs provide a stimulus to a number of borrowers and lowers the probability of default. I'm probably in the minority, but I think this is helpful.