Despite suggestions that specific servicers could eventually face burnout in Home Affordable Refinance Program activity, aggregate refinancing speeds remain elevated, indicating a broad based HARP burnout is unlikely to result in a significant decline in refinancing pacing, said analysts at Bank of America Merrill Lynch.
Last month, BofAML suggested that the potential for HARP burnout on JPMorgan Chase (JPM) serviced collateral could be reflected in slower speeds as early as the next three months.
Furthermore, first quarter of 2013 data showed the volumes of refinancings, in loan counts, slowed for the fastest HARP servicers while increasing as the remaining servicers play catch up.
"Speeds are higher relative to 2012 even for the fastest servicers as the borrower pool has declined, however, the divergence in speeds is a notable trend," said analysts Satish Mansukhani and Anurag Bhardwaj of BofAML.
However, one exception to this trend is Metlife (MET) where the pace of HARP refis picked up despite the servicer being on the fast side through 2012. This was primarily due to the recent merger with JPMorgan, which is deploying some of its excess capacity to refinance Metlife’s HARP-eligible borrowers, the report noted.
"Absolute reductions in the volume of HARP refinancings at the faster HARP is evidence of excess capacity which will be deployed to non-HARP borrowers in the coming months or toward cross-servicer HARP refinancings," BofAML analysts explained.
As a result, speeds are unlikely to drop below 30 conditional prepayment rates (CPR) on the HARPable cohorts this year, even under broad based HARP burnout.
HARP borrowers are also not distributed equally between servicers.
While some servicers comprise a larger share, the overall pace of HARP activity has remained unchanged since 2012 as speeds on the servicers catching up offset the ones set to slow down.
"We expect that to be the case for much of this year until the borrower pool gets depleted into the year-end," BofAML analysts concluded.
On a separate, but similar note, analysts of JPMorgan noted that HARPable premiums sped up across all major servicers.
Banking giants including JPMorgan, Wells Fargo (WFC), and BofA saw month-over-month speeds pick up.
For instance, Citi (C) and BofA HARP speeds increased 2%, up 49 CPR and 42 CPR, respectively, the report noted.
"Arguably, the one encouraging sign from these numbers is that HARP speeds from most major servicers have peaked or are peaking," said analysts Brian Ye, Nicholas Maciunas and Jonathan J. Smith of JPMorgan.