HARP refinances reach a milestoneby Tim Manni
HARP has received a lot of criticism since its inception back in 2009. Admittedly, I’ve been one of the many critics who challenged the program to live up to its stated potential. Recent expansions of the program have opened it up to a wider audience, targeting the most underwater borrowers.
While the program certainly got off to a slow start, it finally seems to be gathering serious momentum, according to the Federal Housing Finance Agency’s November 2012 Refinance Report.
Positive figures all around
If you’re a regular reader of this blog, you know that HARP refinances make up roughly 25 percent of all refinance applications as reported by the Mortgage Bankers Association. The FHFA reports similar numbers. According to the FHFA report, HARP represented 23 percent of total refinance volume in November of last year.
What I find particularly encouraging is that loans with high loan-to-value ratios are finally getting some serious attention. “In November, 46 percent of the loans refinanced through HARP had loan-to-value (LTV) ratios greater than 105 percent and 24 percent had LTVs greater than 125 percent,” according to the report.
Furthermore, some hardest-hit states are leading the country in HARP refinance volume. In Nevada and Florida, HARP refinances represented 68 percent and 45 percent of all refinances respectively. These figures towered over the 23 percent national average.
Finally, a sizeable portion of borrowers not only decided to refinance to lower their interest rate, but to also shorten their loan term. According to the report, 17 percent decided to refinance to either a 15-year mortgage or 20-year mortgage as opposed to a 30-year loan.
There’s no doubt that record-low mortgage rates continue to play a vital role in the refinance market. Expanding the HARP guidelines to include all underwater borrowers undoubtedly expanded the pool of qualified borrowers, but also, each time rates fall further, the scope of potential refinancers grows with it.
Nearly 1 million homeowners refinanced their mortgages between January and November 2012 alone.