HARP Market Share Dropped 18.5% in October, Despite Record Low Rates

The share of mortgages refinanced by Freddie Mac and Fannie Mae through the Home Affordable Refinancing Program (HARP) dropped to 18.5 percent in October from 21 percent in September.  Out of a total loan volume of 441,017 transactions completed by the two government sponsored enterprises (GSEs) during the month, 81,613 were HARP loans. This was a 9000+ decrease in HARP refinancing despite the fact that all overall refinancing, bolstered by new record low mortgage interest rates, increased by about 10,000 loans month-over-month.

HARP was specifically designed to assist underwater homeowners to refinance.  They must have a loan-to-value ratio (LTV) of at least 80 percent to qualify for the program and there is no upper LTV limit.

Through October, 790,619 refinances have been completed through HARP in 2012, bringing the total refinances through HARP from the inception of the program to 1,812,470.  The beginning of this year marked the practical beginning of enhancements to HARP program which removed the previous 125 percent LTV cap and lowered the cost of refinancing to borrowers.  Other changes were made to the program to make it more attractive to lenders.

Freddie Mac completed 34,426 HARP refinances out of a total volume of 170,729 while 47,187 of Fannie Mae's 270,288 loans were done through the program.

Over half of the HARP loans in October had an LTV between 80 and 105 percent.  The remainder of were fairly evenly divided between the two higher categories of LTV, 105 to 125 percent and loans over 125 percent.

One of the enhancements made to HARP loans this year was an incentive for borrowers to choose a shorter loan term when refinancing.  In October, 19 percent of HARP refinances for underwater borrowers were for shorter-term 15- and 20-year mortgages, which build equity faster than traditional 30-year mortgages.