The Silent Refi Surge
One thing I observed recently was how few people seem to know the nation is experiencing a refinance surge. Pick up the paper or turn on the TV and you would think nobody can refinance a mortgage, when more than 10 million already have since 2009, saving billions of dollars in monthly payments.
The number of refinancings that have occurred since the housing crisis began was included in a September 9 statement from the Federal Housing Finance Agency. Specifically, the statement noted that between the time the Obama Administration launched Making Home Affordable and June 30, 2011, Freddie Mac and Fannie Mae refinanced:
- 7 million borrowers through standard refinance programs
- 1 million through our streamlined refinance programs
- 828,000+ through the Home Affordable Refinance Program (HARP), one of the Making Home Affordable initiatives launched in 2009 by the federal government in response to the housing crisis
HARP (part of Freddie Mac's Relief Refinance MortgageSM product) is designed for borrowers who ordinarily would have been unable to qualify for a new mortgage under Freddie Mac's traditional guidelines because they had no or too little equity in their homes as a result of the downturn. Mortgages eligible for sale to Freddie Mac generally require a loan-to-value (LTV) ratio of 95 percent or less; mortgages with LTVs above 80 percent require private mortgage insurance under our standard guidelines. But refinances under HARP can have a current LTV ratio of up to 125 percent. No cash-out is permitted, although some closing costs may be allowed to be rolled into the refinance loan.
For whatever reason, some observers seem so focused on counting HARP loans they've paid little attention to the large number of borrowers who have strengthened their household balance sheets and improved their monthly cash flow by refinancing at historically low mortgage rates. Altogether, we estimate the more than 10 million homeowners who have refinanced through Freddie Mac, Fannie Mae, or FHA and VA, have saved a cumulative $25 billion in mortgage interest payments during just the first 12 months after the refinance.
Refinancings Dominate Freddie Mac Business
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