According to the Federal Housing Finance Agency’s (FHFA) Foreclosure Prevention and Refinance Report, the number of loan refinancings processed through the government's Home Affordable Refinance Program (HARP) grew by 30 percent in the fourth quarter of 2010. A total of 57,000 mortgages were refinanced under the government program during the month, well exceeding the previous monthly record of 45,000 set in September.
HARP is designed to help homeowners refinance their mortgages when they might otherwise not be able to do so due to a lack of equity in their property. The program allows borrowers to refinance mortgage debt up to as much as 125 percent of their current home value, enabling “underwater” homeowners whose property values have declined to take advantage of lower interest rates. The program is limited to mortgages backed by government-owned lenders Fannie Mae and Freddie Mac.
While refinancings soared in the fourth quarter, the number of completed loan modifications fell 18 percent, making it the second consecutive quarterly drop. Of the loans modified in 4Q, nearly half had their monthly payments reduced by at least 30 percent.
The Obama administration launched the program two years ago and it was originally projected to help between 4 and 5 million homeowners refinance their mortgages. But like its sister program HAMP, it has fallen far short of its goals with nearly 622,000 mortgages having been refinanced thus far.
The program is scheduled to expire on June 30 but some industry advocates like the Mortgage Bankers Association have sent a letter to FHFA asking that the program be extended.
FHFA cited record low interest rates during the fall as a major factor in the increased refinancings. Mortgage interest rates reached an all-time record low in October of 4.23 percent on a 30-year fixed-rate mortgage. Refinance activity typically trails interest rates by one to two months, according to the FHFA, because of the time needed to close loans after borrowers lock in rates.
Tags: FHFA, HARP, refinance, refinancings, mortgages, home equity, current home value, loan modifications, HAMP, record low interest rates
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