HARP refinances fall amid rising rates
200,000 homeowners refinanced through HARP in 3Q
Total refinancing volume, including refinances through the Home Affordable Refinance Program, dipped in the third quarter of 2013 amid rising interest rates, the Federal Housing Finance Agency’s third-quarter 2013 Refinance Report revealed.
The total refinance volume hit just below 900,000 in the third quarter, with an estimated 200,000 homeowners refinancing through HARP in that period.
According to the latest Mortgage Bankers Association report, the 30-year, fixed-rate mortgage with a conforming loan limit jumped to 4.61%, while the 30-year, FHA rate soared to 4.30%.
Overall, the total number of refinances through the program for the year nearly hit 778,000, bringing the total since the program began in April 2009 to more than 2.9 million homeowners.
Meanwhile, HARP applications represented 23% of the total refinance volume in the third quarter, with 16% of the HARP refinances posting at a loan-to-value ratio greater than 125%.
During the third quarter, HARP refinances made up 57% of total refinances in Nevada and 49% of total refinances in Florida, more than double the 22% of total refinances nationwide for the same period.
HARP was originally scheduled to expire on Dec. 31, 2013, but was extended to expire on Dec. 31, 2015.
While HARP refinancing activity for 2014 is still uncertain, the recent confirmation of Rep. Mel Watt, D-N.C., as FHFA Director means the conservator could consider an expansion of the HARP eligibility requirements next year.
If that occurs, Sarah Hu, an MBS analyst with Royal Bank of Scotland (RBS), says agency RMBS investors will be dealing with some uncertainty with "cuspy premiums" or 4.5s and 5s coupons feeling the most impact from a HARP expansion.
Prepayment risk will rise a bit if HARP is extended to include more borrowers, Hu pointed out.
"As a result, agency prepayments are expected to be bifurcated: lower coupons could remain muted as mortgage rates continue trending upward, while higher coupon speeds could rise further arising from possible HARP changes," Hu wrote.
In addition, rising mortgage rate will hamper refinance ability somewhat, said Hu, making it likely the market will be driven by home purchases.