Refinance volumes increased as mortgage rates dipped according to the recently released Federal Housing Finance Agency [1](FHFA) October 2017 Refinance Report [2].
According to the report, average interest rate on a 30-year fixed rate mortgage rose from 3.81 percent in September to 3.90 percent in October. It noted that borrowers completed 2,184 refinances through the Home Affordable Refinance Program (HARP) in October, bringing total refinances from the inception of the program to 3,479,901.
The report noted that from inception through October 2017, 2,907,951 loans refinanced through HARP were for primary residences, 110,432 were for second homes and 461,518 were for investment properties.
Additionally, HARP volume represented 2 percent of total refinance volume. Meanwhile, 7 percent of the loans refinanced through HARP had a loan‐to‐value ratio greater than 125 percent.
The report notes that year to date through October 2017, borrowers with loan-to-value ratios greater than 105 percent accounted for 19 percent of the volume of HARP loans. Also, 26 percent of HARP refinances for underwater borrowers were for shorter-term 15-year and 20-year mortgages, which build equity faster than traditional 30-year mortgages.
HARP refinances also represented 5 or more percent of total refinances in Nevada, Illinois, and Florida – more than double the 2 percent of total refinances nationwide over the same period. Underwater borrowers accounted for a large portion of HARP refinances in a number of states. Year to date through October 2017, underwater borrowers represented 27 percent or more of HARP volume in Nevada and Florida, the report noted.
Borrowers who refinanced through HARP had a lower delinquency rate compared to borrowers eligible for HARP who did not refinance through the program. Nine states and one U.S. territory accounted for over 60 percent of the nation's HARP eligible loans with a refinance incentive as of June 30, 2017, according to the FHFA.