Survey: Closing Costs, Misconceptions Keep Borrowers from HARP Refis

Borrowers who refinance through the Home Affordable Refinance Program (HARP) save an average of $83 per week, yet there are still hundreds of thousands of borrowers who are reluctant to refinance, according to a recent commentary authored by Tom Seidenstein, VP for financial markets and policy research at ""Fannie Mae's Economic and Strategic Research Group."":http://www.fanniemae.com/portal/research-and-analysis/emma.html

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To find out what drives borrowers, including those who are underwater, to refinance, the GSE's research group surveyed 2,400 borrowers with Fannie Mae loans who fit HARP eligibility criteria. Half of those surveyed had already refinanced, while the other half have yet to take advantage. The borrowers had loan-to-value ratios ranging from 80 percent to above 125 percent.

When respondents were asked why they have not refinanced under HARP, 34 percent said it's because closing costs are too high, making it the most commonly cited reason.

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The idea of having to take out another 30-year loan hindered 33 percent of respondents, while 24 percent said they receive too many mailings or offers to take any seriously.

Some borrowers were wary of lenders, with 22 percent stating they did not trust the lender who contacted them. For 20 percent of borrowers, it was a matter of too much paperwork.

Among borrowers who were deeply underwater, or those with LTVs exceeding 125 percent, the main reasons were different, with two being misconceptions. For example, 38 percent of the deeply underwater borrowers said they did not refinance under HARP because their home has lost value, so they assumed they would need to pay additional money to refinance. Another 28 percent said they didn't think they would be able to qualify.

The other main reasons deeply underwater borrowers cited were not wanting to take out another 30-year loan (32 percent) and high closing costs (28 percent).

""[O]ur survey of HARP-eligible borrowers indicates that there are potential barriers and misperceptions that may be overcome to encourage borrowers who have not yet refinanced to explore their options. Overcoming these barriers and misperceptions could benefit households,"" wrote Seidenstein. ""Importantly, for many borrowers who are currently eligible for refinancing, time may be running out â€" HARP is scheduled to expire at the end of 2013.""

Between 2009 and November 2012, Fannie Mae has refinanced more than 8.9 million mortgages, including nearly 1.2 million loans refinanced through HARP.