After a few really good years, mortgage refinancing has slipped back to levels not seen since 2008, according to the first quarter refinance report released today by the Federal Housing Finance Agency (FHFA).
The FHFA noted that a total of 370,856 refinances were completed between January and March, including 232,484 via Fannie Mae and 138,372 via Freddie Mac.
That compares to 506,051 total refinances during the fourth quarter of 2013 and nearly 1.4 million during the same period a year ago. Yes, things have slowed down just a bit.
Rates Were a Lot Higher in 2008
Now here’s the scary part – 30-year fixed mortgage rates averaged 6.03% back in 2008.
During the first quarter of 2014, 30-year fixed interest rates averaged less than 4.40%, and yet activity remains at a six-year low. In other words, rates aren’t too high, they’re just not that useful anymore.
Mainly because most of those who could already refinanced, and home sales continue to trickle due to inventory constraints.
Obviously it’s a shame to see low mortgage rates go to waste, but there’s not much that can be done, barring new all-time lows.
HARP Refis Continue to Slip, But Market Share Remains Steady
The story was similar with HARP refinances, which totaled 76,930 during Q1. A total of 46,896 were directed through Fannie Mae and the remaining 30,034 passed through Freddie.
That brought the lifetime total to 3.1 million for the program that originated back on April 1, 2009, not bad, but not quite the 4-5 million originally envisioned.
The HARP share of refinancing was 21% in the first quarter, down from 23% in the fourth quarter but roughly the same as it was a year earlier.
Most of the HARP refinances occurred in the 80-105% LTV band (53,678), followed by the 105-125% LTV band (13,920), and finally the 125+ LTV band (9,332).
In Georgia, 41% of all refinances were completed via HARP, followed by Florida with a 38% HARP-share and Nevada/Michigan with a 33% HARP-share. They were also pretty popular in Illinois (31% share), Arizona (26%), and Idaho (24%).
This kind of illustrates how bad refinance volume would be without HARP available. These states would lose a major amount of business in a hurry.
And let’s be honest, the pool of eligible borrowers is clearly shrinking, so it won’t be long before HARP is absent from the refinance scene altogether.
The good news is that HARP seems to be accomplishing its mission of reducing mortgage delinquencies.
The chart above displays the percentage of loans that were ever 90 days delinquent after given dates based on whether refinanced through HARP or not, assuming they were eligible.
As you can see, loans refinanced through HARP are displaying considerably lower default rates across the board compared to those where a HARP refinance was available but not pursued.
And now that rates are low again, we might see another uptick in HARP activity. However, Mel Watt made it clear that there will not be a HARP 3, despite many pleas to expand the program further.
Read more: How to refinance when underwater on the mortgage.