October 25th, 2011
03:21 PM ET
A day after President Obama announced adjustments to the rules governing his 2009 Home Affordable Refinance Program the independent analyses are now trickling in. CNN Money has a good write-up here, and this seems to be the crux of how they see the prevailing opinion:
Mark Zandi, chief economist at Moody’s Analytics, disagrees. He predicted that under the old rules a total of 1.25 million homeowners would refinance their mortgages under HARP before the original end date in June 2012. The new rules will spur an additional 1.6 million homeowners to refinance before the end of 2013 when the program is now set to wind down, Zandi predicts.
That means that by his calculations, 2.85 million homeowners will participate in the HARP program, far short of the 4 to 5 million originally predicted by the administration. But Zandi doesn’t believe that this means HARP should be viewed as a failure.
“The program will ultimately provide a meaningful boost to the broader economy as financially stressed households will benefit from much lower mortgage payments,” Zandi wrote in an email to CNN. “It will also provide a bit of help to the housing market by forestalling some mortgage defaults.”
But there seems to be some disagreement among experts over exactly how “meaningful” that economic boost will be, and precisely how much help the new program will provide to the housing market.
CNN Money does well at summarizing the two sides of the argument:
The firm Macroeconomic Advisers released its analysis and took issue with the idea that this program will result in an effective stimulus. Because “risk-based fees are entirely eliminated only for those borrowers shortening their fixed-rate mortgages,” those borrowers may see “little change” in their monthly payments even with a lower interest rate, the firm wrote.
“Therefore, we view the new guidelines as aimed more at encouraging borrowers to rebuild balance sheets faster without reducing other expenditures than as a macroeconomic stimulus,” MA wrote in its analysis.
MA generally agrees with Zandi’s estimate that “HARP refinances might double under the revised guidelines,” but they do not believe that would “provide a major stimulus.”
“This does not mean the modifications to the program are not worth pursuing; they are,” MA wrote. “Just don’t expect macroeconomic miracles from them.”
While these two analysts might disagree over the value of a potential doubling – or more – in the number of homeowners refinancing their mortgages under HARP, Zandi and MA both agree that more needs to be done.
“While I think this was a very positive step, it isn't a magic bullet for the housing market and economy,” Zandi wrote to CNN. “Policymakers will thus very likely have to do more.”