Borrowers Could Still Benefit from HARP®
The Federal Housing Finance Agency disclosed that the total refinance volume in December declined as mortgage rates rose. In its refinance report for the fourth quarter of 2016, the FHFA noted that mortgage rates began their ascent in November and increased further in December. The 30-year fixed mortgage rate averaged 4.20%.
As of the quarter ended December 2016, the volume of refinances totaled 750,769. Refinances through the Home Affordable Refinance Program® (HARP®) accounted for 2% of the total refinance volume in 4Q16.
HARP® 4Q16 Highlights
In the fourth quarter of 2016, there were 13,220 refinances made through HARP®. This brings the total of HARP® refinances since its inception in 2009 to 3,447,671. Of all HARP refinances®, 2,883,565 refinanced loans were for a primary residence, 109,507 for a second home, and 454,599 for an investment property.
Year to date through December 2016, borrowers with loan-to-value ratios exceeding 105% took up 21% of the total HARP® refinances. In December alone, 7% of the HARP® refinances were made for borrowers with a loan-to-value ratio more than 125%.
Twenty-seven percent of HARP® refinances made YTD through Dec. 2016 were for shorter-term mortgages spanning 15 to 20 years, which enable consumers to build equity faster than the 30-year fixed-rate mortgages.
The FHFA also found that borrowers with loans refinanced through HARP® had a lower delinquency percentage vis-a-vis those whose loans were eligible for a HARP® refi, e.g. being current on mortgage payments for six months, but did not do so.
While HARP® only represented 2% of the total refinance volume during the said quarter, it accounted for a substantial portion of refinances in some states. HARP® refinances took a 6% or more share of total refinances made in Florida, Georgia and Nevada, which is double the 3% of total refinances made nationwide during the same period.
Similarly, underwater borrowers took a large share HARP® refinances in some states. Specifically, they represented 31% or more of the total HARP® volume in Florida and Nevada YTD through December 2016.
194,324 Borrowers Could Still Benefit From HARP®
As of the third quarter of 2016, 194,324 borrowers remain eligible for a refinance through HARP® that expires in September 2017.
Specifically, these 10 states account for more than 60% of the nationwide HARP® eligible loans with a financial incentive to refinance:
- New Jersey
- New York
- Puerto Rico
The FHFA said in an accompanying statement that these borrowers (i) meet the basic eligibility requirements for HARP®, (ii) have a remaining term on their loan exceeding 10 years, and (ii) have a mortgage rate that is at least 1.5% higher than the current mortgage rates.
According to the FHFA, a refinance through HARP® could save these borrowers $2,400 on an average per year.
Justin McHood is a managing partner at Suited Connector and has been recognized by national media outlets as a financial expert for more than a decade.