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TH E M REP O RT | 47 O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T HARP Sees Declining Popularity in Q3 2014 Though historically low interest rates pushed more homeowners to refinance, HARP refis headed south. L ow mortgage interest rates helped elevate refinance volumes throughout the third quarter of 2014, yet demand for the government's relief refinance program continued to diminish. Together, Fannie Mae and Freddie Mac reported 389,284 refinances during last year's third quarter, according to their conservator, the Federal Housing Finance Agency (FHFA). That figure compares to a total of 344,507 in the second quarter. The boost came as mortgage rates remained more or less stable in the 4.1 to 4.2 percent range, well below averages seen throughout the early part of the second quar- ter. With rates hovering around 4 percent, refinancing activity for Q 4 2014 is widely expected to beat out last year's slump. As refinance volumes rose, the share of refinances completed through the government's Home Affordable Refinance Program (HARP) fell further, according to FHFA. The agency's report shows HARP refinances totaled 44,136 in Q 3, representing about 11 percent of total refinances. In Q2, HARP refinances totaled 54,040, or about 16 percent of all refinances. Since the program first kicked off in 2009, FHFA estimates HARP refinances have topped 3.2 million. However, interest in the program has steadily fallen over the last year, with the total number of HARP refinances in 2014 expected to hit only about one-third of 2013's total—even as FHFA continues its initiative to boost borrower awareness by hosting town hall-style events in certain hard-hit markets. By FHFA's estimate, there are more than 722,000 borrow- ers who have a "strong financial incentive" to refinance, especially with mortgage rates at histori- cal lows. With many Americans paying 1.5 percentage points more in interest than the current market average, the agency esti- mates those borrowers could save an average of $200 per month on their mortgage payments. Despite its failing popularity nationwide, HARP refinances con- tinue to account for a sizable share of refinances in certain states. Year-to-date through September 2014, HARP represented 33 percent of total refinances in Georgia and 31 percent of refinances in Florida, nearly double the nationwide share of 16 percent. HARP numbers also remain relatively strong among under- water borrowers. According to FHFA, 7,577 of HARP refinances in Q 3 2014 were for consumers with loan-to-value (LTV) ratios ranging from 105 to 125 percent, while 4,124 were for mort- gages with LTVs higher than 125 percent. Although both numbers were down slightly from the second quarter, they compare to a much bigger drop in HARP activity among borrowers with 80 to 105 percent LTVs. THE LATEST SERVICING