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Why Borrowers Are Still Sweet on HARP

Refis at Fannie Mae and Freddie Mac decreased in the second quarter, according to the quarterly Refinance Report by the Federal Housing Finance Agency (FHFA).

The FHFA reported that together, the government-sponsored enterprises (GSEs)  completed 299,466 refinances in Q2, compared with 356,002 in the first quarter.

Attributing the decrease in refi volumes in the second quarter to rising mortgage rates, the report indicated that total refinance volume decreased in June 2018 as mortgage rates rose in May, continuing a trend first observed in October 2017. "Mortgage rates decreased in June: the average interest rate on a 30‐year fixed rate mortgage fell to 4.57 percent from 4.59 percent in May," FHFA said.

Of the total refinances,  2,973 loans were refinanced through the Home Affordable Refinance Program (HARP), bringing the total number of HARP refinances to more than 3 million since the inception of the program in 2009, the report indicated.

Although the program is scheduled to expire on December 31, 2018, FHFA said that 49,094 borrowers could still benefit financially from a HARP refinance.

"These borrowers meet the basic HARP eligibility requirements and have a remaining balance of $50,000 or more on their mortgage, a remaining term on their loan of greater than 10 years, and a mortgage interest rate that is at least 1.5 percent higher than current market rates," FHFA said. "These borrowers could save an average of $2,290 annually by refinancing their mortgage through HARP."

The report revealed that during Q2 32 percent of HARP refinances for underwater borrowers were for shorter-term 15- and 20-year mortgages. According to the FHFA, these mortgages build equity faster than the traditional 30-year loans.

Regionally, the report found 10 states that accounted for more than 70 percent of borrowers who remained eligible for HARP and had financial incentive to refinance their loans. They included Illinois, New Jersey, Ohio, Florida, Michigan, Pennsylvania, Maryland, Alabama, Georgia, and New York.

The report also indicated that borrowers who refinanced through this program had a lower delinquency rate compared with borrowers eligible for HARP who did not refinance through the program.

Click here to get all the details of the FHFA's quarterly Refinance Report.

About Author: Radhika Ojha

Radhika Ojha is an independent writer and editor. A former Online Editor and currently a reporter for MReport, she is a graduate of the University of Pune, India, where she received her B.A. in Commerce with a concentration in Accounting and Marketing and an M.A. in Mass Communication. Upon completion of her master’s degree, Ojha worked at a national English daily publication in India (The Indian Express) where she was a staff writer in the cultural and arts features section. Ojha also worked as Principal Correspondent at HT Media Ltd and at Honeywell as an executive in corporate communications. She and her husband currently reside in Houston, Texas.

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