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16 | TH E M R EP O RT COVER STORY rose enough so that homeowners had positive equity. They were upside down, and they wanted to refinance to take advantage of lower rates, but they had to wait until they had positive equity. Or maybe a lot of them just wanted to get up to 20 percent or more equity so they could refinance to drop PMI. During all this time, people were changing jobs less, so they were moving less frequently. If they didn't buy a house, then maybe they just refinanced in - stead. I think that had something to do with it, too." But Lately . . . T he furious pace of the refinance market reached immediately after Brexit did not hold up. By mid-October, after weeks of declines, the MBA's data showed that refinances had fallen back down to pre-Brexit levels. "The world didn't end with England passing the decision to exit the European Union, and I think the markets have got - ten more comfortable with that," Blackwell said. "Also, the U.S. economy continues to improve, albeit slowly, and so interest rate levels have moved up somewhat. And of course, the Fed has indi- cated a likely increase in interest rates in December. It's not certain, but I think the markets believe that will happen. All of those things have contributed to interest rates normalizing somewhat, and they are at a level today that is high enough to where you don't have large percentages of the mortgage population or home- owning population that are in the money for refinancing." With that said, is it possible that the refinance market is tapped out? The latest residential vacancy and homeownership report from the Census Bureau reported approximately 75 million owner-occupied residential homes in the United States. Upon elimi- nating those homeowners who have either paid off their mort- gage, have a loan at a rate similar to current rates, or have already refinanced with a rate similar to current rates, that leaves only so many homeowners with a current mortgage rate high enough to fi- nancially benefit from refinancing. Jeff Bode, President and Owner of lender Mid-America Mortgage, said the market is expe- riencing "refinance fatigue"—or in other words, most qualified bor- rowers who would benefit from a refinance have already done so, and those borrowers who do not qualify and would not benefit have not done so. "The reason we've continued to have refinanc- es is rates have continued to just drop," Bode said. "We're going to have a good strong economy for another few years and I think purchase business will pick up. But I just don't think it will pick up enough to cover the drop we'll have in refinances." Also, HARP numbers have been declining steadily since the end of 2013. FHFA estimated that as of the end of Q1 2016, there are still more than 323,000 U.S. borrowers eligible for the program who have a financial incentive to refinance. To qualify for HARP, homeowners must have a mortgage owned by Fannie Mae or Freddie Mac, have a remaining balance of $50,000 or more on their mortgage, have a remaining term on their loan of greater than 10 years, and have a mortgage interest rate that is at least 1.5 percent higher than current market rates. More than 3.3 million bor - rowers have refinanced through HARP, though approximately 2 million of those were concen- trated into a two-year period from early 2012 to late 2013. The program is scheduled to expire in September 2017, after which FHFA plans to replace it with a high LTV refinance option. The Shrinking Pool T he pool of refinance candidates shrinks even further when considering that many homeowners who could financially benefit from refinanc- ing (i.e. those with much higher mortgage rates than current rates) either can't because they would not qualify for another mortgage or don't have the incentive to refinance. "The people who could have and wanted to refinance, they actually finally got around to doing it," Lewis said. "So you just have fewer people who haven't refinanced already. We're just run- ning out of people to refi." CoreLogic reported that as of May 2016, approximately 41 percent of residential mortgages representing 31 percent of outstanding unpaid principal balance had mortgage rates of greater than 4.38 percent, which is approximately 100 basis points higher than the average 30-year fixed-rate mortgage has been for much of 2016 That 41 percent breaks down to 18 percent with rates between 4.38 and 5 percent and 23 percent with rates higher than 5 percent. What CoreLogic found was that serious delinquency rate tends to be higher for homeown - ers with higher interest rates. The average serious delinquency rate nationwide for all residential mortgages is 2.9 percent, and it ascends along with borrowers' rates. For mortgages with rates between 5 and 6, the serious de- linquency rate jumps to 4 percent. Approximately 12 percent of mort- gages with rates higher than 7 percent are in serious delinquency (four times the national average). "This explains why a por- tion of these borrowers haven't refinanced," CoreLogic Principal Economist Molly Boesel said. "They are behind on their pay- ments and most likely wouldn't be able to qualify for a new mortgage." The number of "in the money" borrowers for whom refinanc- ing would make sense shrinks even further when credit score is figured in. When a borrower's mortgage becomes 30 days or more past due, it adversely affects that borrower's credit. And the share of mortgages that has ever been 30 days or more past due, or the "ever-30" rate, also climbs higher along with higher mort- gage rates. Approximately half of mortgages with rates of 7 percent or higher have been 30 or more days delinquent at some point. "We're going to have a good strong economy for another few years and I think purchase business will pick up. But I just don't think it will pick up enough to cover the drop we'll have in refinances." — Jeff Bode, President and Owner, Mid-America Mortgage