Refinancing is Freddie Mac's Bread & Butter Today
Refinancing is Freddie Mac's bread and butter in today's marketplace. Mortgage refinances represented an estimated 78 percent of our single-family purchase volume in 2011 and 80 percent in 2009 and 2010. In the last three years, we refinanced about $930 billion in mortgages – helping nearly 4.3 million American families lower their payments or shorten their mortgage terms.
This translates into real money for borrowers. For example, the borrowers we helped to refinance in 2011 will save an average of $2,700 in interest payments over the next year. That's about $2.7 billion that these homeowners will have to spend, save, or invest because we were there to supply the credit their lenders needed to close their new mortgages.
One reason for this high level of refinance activity is the nation's historically low mortgage rates, plus the fact that any borrower with a Freddie Mac mortgage can apply for a refinance through any of the 2,300 lenders that do business with us. An eligible borrower can refinance whether their mortgage is held in our portfolio or is part of a pool backing a security. The only obstacle to refinance is their lender's requirements – which can be more strict than our own – and the borrower's financial qualifications.
At the same time, Freddie Mac has streamlined the refinancing process for lenders and eligible borrowers. This includes implementation of the Obama administration's enhanced Home Affordable Refinance Program (HARP), as well as changes we've made on our own to help qualified borrowers obtain a more affordable mortgage. (More information is available here)
Refinancing not only helps homeowners, prudently refinancing borrowers can also help our company reduce its losses. Serious delinquency rates, which currently exceed 10 percent for mortgages purchased during 2006-07, are about 0.25 percent for loans purchased between 2009 and 2011. Even including our pre-conservatorship book of business, our single-family serious delinquency rate of 3.58 percent is less than half the delinquency rate of the overall market, which is 7.89 percent, according to data from the Mortgage Bankers Association of America.
Freddie Mac is committed to helping borrowers keep their homes while minimizing our credit losses and minimizing support from U.S. taxpayers through prudent underwriting and strong risk management. Refinancing mortgages can help families reduce their monthly mortgage payments and help us reduce our exposure to mortgage default. All of this advances our mission – to help stabilize and revive the nation's housing markets.
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