Are record-low interest rates masking high-cost mortgage lending?

Are record-low interest rates masking high-cost mortgage lending?

Five leading economists weigh in and the answer may surprise you partners with Google to predict housing trends

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The New York Times rambles, and mangles mortgages along the way

Mortgage finance and mortgage regulation aren’t the paper’s strong suits

HARP nearly doubles refinanced mortgages in first quarter

The number of refinanced Fannie Mae and Freddie Mac mortgages nearly doubled in the first quarter as the largest banks launched the expanded Home Affordable Refinance Program.

Servicers refinanced roughly 180,000 GSE loans in the first three months of 2012, nearly double the 93,000 completed in the fourth quarter, according to Federal Housing Finance Agency data. In March alone, servicers refinanced 80,000 borrowers under the program.

HARP launched in April 2009 to allow more borrowers who owe more on their mortgage than their home is worth to refinance. But few severely underwater borrowers could take advantage of historically low rates. The FHFA expanded the program last fall to remove the loan-to-value ceiling of 125% — the so-called HARP 2.0 — and to reduce upfront fees and eliminate repurchase risk if the original servicer on the loan completes the workout.

With the surge in the first quarter, total HARP refinancing now totals more than 1.2 million loans.

And more severely underwater borrowers are finally being included (click on the graph below to expand).

More than 4,400 borrowers with LTVs above 125% refinanced through HARP in the first quarter. More than half of them were located in California, Florida and Arizona, states hardest hit by the foreclosure crisis.

Borrowers in the 105% to 125% range were often shut out as well, but that changed under the expanded program as well. In the first quarter, nearly 37,000 of these underwater borrowers refinanced, nearly triple the 13,000 in the previous quarter.

Lawmakers are considering another expansion of the program. Most of the HARP business is going to the largest banks because of the reduced repurchase risk, which is generating higher profits for these firms. Smaller lenders want in on the action and are busy lobbying Congress for more competition, specifically asking to remove repurchase risk for all lenders.


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