Freddie Mac’s approach to the first Home Affordable Refinancing Program (HARP) refinancing program resulted in faster prepayment speeds on its securitized mortgages compared to Fannie Mae MBS, according to a new report from Amherst Securities Group.

However, the recently revised HARP has narrowed the differences between Fannie and Freddie’s refinancing programs and their prepayment speeds.

“On balance the Freddie speeds on HARP eligible loans was much faster.  Under HARP 2.0, with guidelines more uniform, the speeds have been very similar,” the Amherst Mortgage Insight report said.

When HARP was first introduced in May 2009, the GSEs provided their seller/servicers relief from property value representations and warranties.

But Fannie’s relief effectively covered only 25% to 35% of HARP refis while Freddie’s relief covered 70% to 80% of loans. “This made it easier to do a Freddie HARP than a Fannie HARP loan,” the ASG report says.

In addition, Freddie provided its servicers with a list of eligible borrowers that could qualify for a HARP refinancing. “Fannie did not do this, which slowed their speeds relative to Freddie’s,” the research firm said.  

As a result of these and other differences, Freddie Golds (30-year pass through certificates) “prepaid much faster than their Fannie counterparts in virtually every coupon (except 4.5s) during 2010-2011,” the report said.

But all that changed this year. “Fannie and Freddie prepayments have substantially converged, and in some cohorts the Golds are actually slower.”

The report, entitled Fannie/Freddie Price Spreads – Buy Golds also points out that Freddie has clamped down on third-party originators and others that sold the agency loans that were most likely to refinance.

In new contracts, the GSE is insisting that loan deliveries must be “representative of the servicer’s production.”

Participation in the HARP program has been strong this year, though several megabanks are concentrating mostly on their own portfolio instead of competing for loans serviced by other firms.

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