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Firm Anticipates Increased Non-HARP Refinance Numbers for GSEs

Following ""FHFA's report on HARP refinances in August"":http://www.dsnews.com/articles/harp-on-track-to-reach-1m-borrowers-this-year-2012-10-16, Keefe, Bruyette & Woods (KBW) released its own analysis of the data and expressed anticipation for an even greater increase in non-HARP refinance activity.

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KBW explained FHFA data on HARP volume showed a 2.6 percent month-over-month increase in August, while non-HARP refinance activity for Fannie Mae and Freddie Mac was up 23.6 percent over the same period.

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In the report, KBW said it believes QE3 will lead to increased ""organic refi,"" which would push down the share of HARP activity.

Although FHFA's report showed 98,885 loans were refinanced through HARP in August, an increase from July's 96,371, KBW noted monthly declines in the share of HARP refinances.

In August, refinance activity accounted for 24 percent of all refinances, down from 27 percent in July and and 33 percent in June.

In the report, KBW stated, ""Given the decline in mortgage rates, we believe that a pick-up in organic refi could lead to modestly lower percentages of HARP volume to total GSE refi in the coming quarters.""

Despite recent declines, HARP activity is still strong. Since HARP's 2009 inception, 1.6 million loans were refinanced through the program, with over 600,000 of those refinances occurring year-to-date. This may very well put HARP on track to refinance 1 million loans in 2012.

Thus, KBW further stated, ""[W]e expect the absolute level of HARP volume to remain elevated over the coming quarters. We expect HARP activity to continue to contribute to strong industry gain-on-sale margins into 2013.""

About Author: Esther Cho

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