The drop in HARP refis occurred mostly in refinancings with LTVs above 125%, which totaled 18,300 in October—down 20% from the previous month.
The FHFA noted that borrowers in October with loan-to-value ratios above 105% accounted for 45% of Home Affordable Refinance Program activity, compared to 50% in September.
HARP volume also slipped in terms of overall GSE refinancings. HARP loans represented 19% of total refinancings by Fannie and Freddie in October, compared to 24% in the third quarter.
Analysts at Keefe Bruyette & Woods expect the HARP program will have another strong year and fuel $150 billion in refis in 2013—down slightly from this year.
“We expect HARP to continue boosting gain-on-sale margins,” the KBW analysts write.
The HARP program was designed to streamline refinancings of GSE loans with LTVs above 80%. The FHFA introduced improvements to the program last January.
Year-to-date, 790,600 GSE loans have been refinanced through the HARP program, compared to 400,000 in the full year of 2011.