Federal Housing Finance Agency, or FHFA, reported an increase in refinances for the month of October 2017 as mortgage rates in September remained low.
At the core of the FHFA’s October 2017 report were refinances through the Home Affordable Refinance Program® that are moving closer to hitting 3.5 million since its inception in 2009.
Lower Rates Push Refinance Numbers Up in October
Last October, Fannie Mae and Freddie Mac completed refinances of conforming loans totaling 142,687:
- Fannie Mae – 83,949 loans refinanced
- Freddie Mac – 58,738 loans refinanced
The monthly refinance volume was up from September’s 128,738 refinances. The increase was attributed to lower mortgage rates in September, encouraging more borrowers to refinance their existing mortgages.
Rates did rise in October to 3.90% from a month ago’s 3.81%.
On a year-to-date basis (through October), the total refi volume stood at 1,372,402. The total refinance volume in 2016 reached 2,325,671.
What Was HARP®’s Share in October?
The government’s HARP® program is set to expire in December 2018 but as of October 2017, it took up 2% of the total refinance volume.
That’s 2,184 HARP® refinances made, down from 2,229 the previous month.
With October’s output, the HARP® volume since its inception now totaled 3,479,559.
Underwater Borrowers in October
HARP® allows homeowners with little to no equity to refinance under the program. No matter how “underwater” one is on his/her mortgage for as long as the loan-to-value ratio is higher than 80%, he/she may be eligible for the program.
A breakdown of loans with the following LTV ratios refinanced via the program last October is as follows:
- Loans with LTV > 80% – 105% totaled 1,797.
- Loans with LTV > 105% – 125% totaled 238.
- Loans with LTV > 125% totaled 149.
The FHFA also found that 26% of borrowers who took advantage of HARP® opted to refinance into shorter-term loans such as 15- and 20-year mortgages to build equity faster.
Furthermore, those who refinanced via the affordable refinance program posted a lower delinquent rate than those who could have been eligible for the program but did not refinance through it.
While the number of HARP® refinances has been on a decline since its peak in the third quarter of 2012, the share of loans refinanced through the program in these states is higher than the nationwide average of 2% through October 2017 (YTD):
- Nevada, Florida, and Illinois each got 5% total HARP® share.
- Arizona and Georgia were tied at 4%, followed by Michigan 3%.
Notably, Nevada has the highest share of loans refinanced via HARP® with 26% since the program started. It was followed by Michigan at 24%, Arizona at 23%, Florida with 20%, and Idaho and Georgia both tied at 16%.
Other eligibility requirements for the program include the loan being current, owned by either Fannie or Freddie, and originated on or before 31 May 2009.
And as of June 30, 2017, the FHFA identified 118,705 eligible loans with an incentive to refinance via HARP®. Sixty percent (60%) of these HARP®-eligible loans are found in Illinois, Puerto Rico, Florida, Michigan, Ohio, New Jersey, Pennsylvania, Georgia, Maryland, and Alabama.
Last October’s refinance numbers include streamline refinances — those that do not qualify for HARP® — that totaled 7,138 loans.