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Carroll School of Management

Ed Haldeman, Jr.

Chief Executive Officer, Freddie Mac

Excerpt from remarks to Boston College’s Chief Executives’ Club of Boston 

October 26, 2011

TAKEAWAY: HARP II

I did want to speak to HARP II, the change that has been made to the HARP program and announced just this week. It’s worth spending some time on HARP, because this is the only refinance program that is available for families whose homes are underwater. And HARP, the original HARP, was passed in the Obama administration early after taking office. We call it HARP I. And it’s been very effective at helping underwater buyers refinance their homes.

Today, about 894,000 families have been able to refinance under HARP I. However, as our regulator said, that’s fewer than we expected, and fewer than are eligible for the program. So as a result, this week, announced on Monday, was HARP II, an attempt to make the program easier and more accessible to more families. And let me outline some of the changes.

The original HARP program capped out when the loan-to-value ratio was 125 percent, so you had to be under 125 percent. We’ve now totally eliminated that ceiling.

Another adjustment that was made was that fees for borrowers who refinance are completely eliminated if the borrower refinances into a shorter maturity, trying to encourage some people, through an incentive, to reduce from a 30-year perhaps to a 15- or 20-year mortgage, and thereby getting more right side up in a shorter period of time.

We’ve also eliminated the need for appraisals, and we’ve taken away many of the risks that lenders were exposed to through representations and warranties that transferred from the original loan to the second one. And then finally, the extension date was extended to the end of 2013, another 18 months or so.

The result of all this is [that] our regulator believes that over the next two years, HARP II will allow another 900,000 to 1 million people to seek and be able to refinance their homes.