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Refinances Take a Turn

According to the latest Federal Housing Finance Agency [1] (FHFA) Refinance Report,  the average interest rate on a 30‐year fixed rate mortgage rose to 4.83 percent in October from 4.63 percent in September. Total refinance volume increased in October after falling throughout most of the year.

The report notes that borrowers completed 507 refinances through HARP in October, with the total refinances since the program’s inception now up to 3,493,512. Harp refinances make up just one percent of the total refinance volume nationally, and six percent of the loans refinanced through HARP had a loan‐to‐value ratio greater than 125 percent.

According to the FHFA, the decreasing refinance volume throughout the rest of the year was a reaction to rising mortgage interest rates. Additionally, The FHFA states that borrowers who refinanced through HARP had a lower delinquency rate on average compared to borrowers who were eligible for a HARP refinance, but did not refinance through HARP. As of October 2018, borrowers with loan‐to‐value ratios greater than 105 percent accounted for 16 percent of the volume of HARP loans.

The report also notes that nine states and one territory (Puerto Rico) accounted for over 70 percent of the nation's HARP eligible loans with a refinance incentive as of June 30, 2018. Puerto Rico made up the largest number of HARP eligible loans, at 4,522, closely followed by Illinois with 4,511. Other states with high numbers of HARP eligible loans include New Jersey, Florida, Michigan, Ohio, Pennsylvania, Maryland, Alabama, and Georgia. In total, 38,818 loans were eligible for the HARP refinance initiative as of June 30, 2018.

In Florida, Georgia, and Illinois,  HARP refinances represented two percent of total refinances compared to one percent of the total nationwide. In several states, underwater borrowers made up a large portion of HARP refinances. Underwater borrowers represented 20 percent or more of HARP refinances in Nevada, Florida, and Michigan.

Read the full report from the FHFA here. [2]