HARP activity hits all-time high

One government initiative has been particularly successful so far this year in its effort to help more households saddled with negative equity.

One government initiative has been particularly successful so far this year in its effort to help more households saddled with negative equity.

The Home Affordable Refinance Program, which was established to assist borrowers who can't qualify for conventional refinances, accounted for nearly one-third of Freddie Mac's loan restructures during the second quarter, the government-sponsored enterprise reported. This is the highest share of activity HARP has accounted for since the program's inception. 

Meanwhile, of the total borrowers who refinanced during the three-month period, 81 percent either maintained the same loan balance while lowering monthly payment or reduced their overall principal balance by paying extra during closing.

Additionally, as homeowners slowly rebuild equity across the country, many also capitalized on refinancing options to cash out nearly $5 billion from their loans to put toward other investments, such as property improvement projects, auto loans and college tuition. Although this may seem like a lot, it was significantly lower than the peak cash-out refinance volume of $84 billion seen during the second quarter of 2006.

Mortgage rates edge higher
 
A slight increase in fixed mortgage rates during the week ending August 2 could have an impact on the future of HARP activity.

During this period, the average rate for a 30-year FRM increased to 3.55 percent from an all-time low of 3.49 percent a week earlier, Freddie Mac said in a separate report. In addition, the rate for a 15-year FRM averaged 2.83 percent, which was also slightly higher from the previous week.

Freddie Mac vice president and chief economist Frank Nothaft believes a string of mixed economic reports could have caused the gains.

"Recent announcements of additional debt relief for the Eurozone and mixed domestic economic indicators added upward pressure on Treasury yields as well as mortgage rates this week," Nothaft said. "The U.S. economy grew at a 1.5 percent annualized rate in the second quarter, slower than the 2.0 percent growth in the first quarter with consumer spending in June unchanged from May."

Although the overall economy remains on shaky ground, there have been a number of promising housing market reports in recent months. Specifically, property values appreciated 2.2 percent during May in the nation's 20 largest metropolitan areas, according to the Standard & Poor's/Case-Shiller Home Price Index. This marked the fourth consecutive month of month-over-month increases.



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