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Low mortgage interest rates helped elevate refinance volume throughout the third quarter as demand for the government's relief refinance program continued to diminish.
Together, Fannie Mae and Freddie Mac reported 389,284 refinances throughout the third quarter, according to their conservator, the Federal Housing Finance Agency (FHFA). The figure compares to a total of 344,507 in the second quarter.
The boost came as mortgage rates remained more or less stable in the 4.1–4.2 percent range, well below averages seen throughout the early second quarter. With rates now hovering around 4 percent, refinancing activity for the fourth quarter is well-positioned to beat out last year's slump.
As refinance volumes rose, the share of refinances completed through the government's Home Affordable Refinance Program (HARP) fell further, according to FHFA. The agency's report shows HARP refinances totaled 44,136 throughout Q3, representing about 11 percent of total refinances. In Q2, HARP refinances totaled 54,040, about 16 percent of total refinance numbers.
Since the program first kicked off in 2009, FHFA estimates HARP refinances have topped 3.2 million. However, interest in the program has steadily fallen in the last year, with the total number of 2014 HARP refinances looking to hit only about one-third of last year's total—even as FHFA continues its initiative to boost borrower awareness by hosting town hall-style events in certain hard-hit markets.
By FHFA's estimate, there are more than 722,000 thousand borrowers who have a "strong financial incentive" to refinance, especially with mortgage rates at historical lows. With many Americans paying 1.5 percentage points more in interest than the current market average, the agency estimates those borrowers could save an average of $200 per month on their mortgage payments.
Despite its failing popularity nationwide, HARP refinances continue to account for a sizable share of refinances in certain states. Year-to-date through September, HARP represented 33 percent of total refinances in Georgia and 31 percent of refinances in Florida, nearly double the nationwide share of 16 percent.
HARP numbers also remain relatively strong among underwater borrowers. According to FHFA, 7,577 of Q3 HARP refinances were for consumers with loan-to-value ratios ranging from 105–125 percent, while 4,124 were for mortgages with loan-to-value ratios higher than 125 percent. While both numbers were down slightly from the second quarter, they compare to a much bigger drop in HARP activity among borrowers with 80–105 percent loan-to-value ratios.
