MReport March 2017

TheMReport — News and strategies for the evolving mortgage marketplace.

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TH E M R EP O RT | 61 SECONDARY MARKET THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T HARP-Incentivized Borrowers Are Concentrated About 60 percent of borrowers who have an incentive to refinance through HARP live in one of 10 states. M ore than half of the borrowers who could benefit from refinancing their mortgage loan through the Federal Housing Finance Agency (FHFA)'s Home Affordable Refinance Program (HARP) are concentrated in 10 states, according to the agency's November 2016 Refinance Report in mid-January. Approximately 242,512 borrowers nationwide are eligible and have an incentive to refinance through HARP as of June 30, 2016, according to FHFA, and approximately 60 percent of them are located collectively in Florida, Illinois, Michigan, Ohio, Georgia, New Jersey, Pennsylvania, Puerto Rico, New York, and California. The state with the largest population of borrowers with an incentive to refinance through HARP as of June 30 last year was Florida with 28,772. The FHFA has made a push to reach HARP-eligible borrow - ers who have an incentive to refinance through the program by conducting outreach events in the cities with highest concentra- tion of borrowers with an incentive to refinance through HARP (Chicago, Atlanta, Detroit, Miami, Newark, and Phoenix). The agency also hosted webinars, websites, and social media cam- paigns in an effort to try and reach these borrowers. Since HARP was launched in April 2009 as a way to help underwater borrowers lower their monthly mortgage payments, more than 3.44 million borrowers with GSE-backed loans have refinanced through HARP—including the 4,530 who did so in November 2016, according to FHFA. HARP refinances made up 2 percent of all refinances complet - ed by the GSEs in November, according to FHFA. At their peak, HARP refinances comprised 26 percent of all GSE-completed refinances (in Q 3 2012, when 319,000 refis were completed). HARP is scheduled to expire on September 30, 2017, and the FHFA plans to replace it late in the year with a high LTV refinance option. Of the 4,530 borrowers who refinanced with HARP in November, 5 percent of them had an LTV ratio of greater than 125 percent, according to FHFA. To be eligible for HARP, borrowers must have a loan owned or guaranteed by Fannie Mae or Freddie Mac, have a loan origi - nated on or before May 31, 2009, have a current LTV of greater than 80 percent, and be current on mortgage payments at the time of the refinance. Borrowers are allowed one late payment in the 12 months prior to the refinance as long as it did not occur in the six-month period before the refinance. FHFA esti - mated these borrowers save an average of approximately $2,400 per year on mortgage payments. Fannie Mae's Mortgage Portfolio Continues to Fall The GSE's mortgage-backed securities portfolio declined from $74 billion at the start of 2016 to $42 billion at year-end. F annie Mae's gross mort- gage portfolio contracted for the fourth straight month, according to the company's December 2016 Monthly Volume Summary. December's 51.9 percent an - nual rate of contraction topped November's contraction rate of 37.1. August of 2016 was the last month to see any sort of expan - sion, when the portfolio grew at an annual rate of 9.1 percent. Following the contraction, the unpaid balance amounted to $272.4 billion at the end of the month. This represents a $17 billion decrease from November's figure of $289.5 billion, as the amount of sales ($40 billion) and liquidations ($4.6 billion), surpassed the total amount of purchases of nearly $28 billion for the month, according to the report. Given the most recent figures, the annual compounded rate of contraction for the entire year comes to 21.1 percent. Fannie Mae's total book of business, which includes the gross mortgage portfolio plus to - tal Fannie Mae mortgage-backed securities and other guarantees minus Fannie Mae MBS in the portfolio, increased at an annual compound rate of 2.6 percent for the month. December's figure brings the overall year's com - pound growth rate to 1.4 percent. The amount of Fannie Mae mortgage-backed securities within the total book of business dwindled down to $42 billion at year's end, a considerable decrease from January 2016's figure of nearly $75 billion. The figure had been decreasing fairly consistently throughout the year, but saw a slight bump in August, when it hit $61 billion and stayed around the $60 billion range for the following three months until it dropped to $41 billion in November. Fannie Mae's continued efforts to decrease its mortgage portfolio are evident by viewing the con - sistent contraction the portfolio experienced throughout 2016. This year will likely experience consistent contractions similar to those seen in 2016.

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