Wednesday, November 28, 2012

FHFA: HARP Refinance Boom Continued in September

by Bill McBride on 11/28/2012 04:38:00 PM

Note: HARP is the program that allows borrowers with loans owned or guaranteed by Fannie Mae or Freddie Mac - and with high loan-to-value (LTV) ratios - to refinance at low rates.  Fannie or Freddie are already responsible for the loan, and allowing the borrower to refinance lowers the default risk.

From the FHFA:

The Federal Housing Finance Agency (FHFA) today released its September Refinance Report, which shows that Fannie Mae and Freddie Mac loans refinanced through the Home Affordable Refinance Program (HARP) accounted for nearly one-quarter of all refinances in the third quarter of 2012. More than 90,000 homeowners refinanced their mortgage in September through HARP with more than 709,000 loans refinanced since the beginning of this year. The continued high volume of HARP refinances is attributed to record-low mortgage rates and program enhancements announced last year.
...
In September, half of the loans refinanced through HARP had loan-to-value (LTV) ratios greater than 105 percent and one-fourth had LTVs greater than 125 percent.

In September, 19 percent of HARP refinances for underwater borrowers were for shorter-term 15- and 20-year mortgages, which help build equity faster than traditional 30-year mortgages.

HARP refinances in September represented 45 percent of total refinances in states hard hit by the housing downturn–Nevada, Arizona, Florida and Georgia–compared with 21 percent of total refinances nationwide.
Note: the automated system wasn't released until the end of March - and there were some issues with that system - so HARP refinances didn't really pickup until sometime in Q2. Now they are on pace for around 1 million refinances this year. 

These "underwater" borrowers are current (most took out loans 5 to 7 years ago), and they will probably stay current with the lower interest rate.

This table shows the number of HARP refinances by LTV through September of this year compared to all of 2011. Clearly there has been a sharp increase in activity. Note: Here is the September report.

HARP Activity
2012, Through SeptemberAll of 2011Since Inception
Total HARP709,006400,0241,730,857
LTV >80% to 105%407,330340,0331,338,565
LTV >105% to 125%159,98059,991250,596
LTV >125%141,6960141,696

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