The monthly volume of mortgage loan refinancing declined sharply in December 2012 following previous increases at least in part due to regulation that took effect on Dec. 1.
Loans refinanced under the Home Affordable Refinance Program declined in December to 41.1%, while the volume of non-HARP loan refinancing decreased 36.2%, according to the FHFA.
December data show a stark reverse in both HARP and non-HARP refinance activity, they wrote, since it happened following a 42.2% increase in
Keefe, Bruyette & Woods’ analysts note that the report attributed the decline to originators increasing their November volume ahead of the increase in the Fannie Mae and Freddie Mac guarantee fee which took effect on Dec. 1, 2012.
Analysts note that while the November volume “was supported by strong refi activity in advance of a 10 basis point increase in the GSE g-fee,” the December decline “also reflected typical yearend weakness.”
HARP refinances in December totaled 76,461 loans, down from 129,746 in November and 91,254 in October.
HARP volume as a percentage of total refinancing of GSE loans fell to 21.3% from 22.6% in November, but nonetheless was higher than the 20.7% reported in October.
“Driven by both the low rate environment and continued strong volume through HARP,” analysts wrote, these refinancing volume fluctuations are expected to remain strong through 2013. Even if mortgage rates increase further over the near term, the HARP volume “could increase as a percentage of the total” because it should be less rate dependent.
The FHFA report indicates the HARP volume decreased across all loan-to-value categories in December including both loans to borrowers with LTVs over 125 and borrowers with LTVs between 80 and 105.
The annual HARP volume for 2012 totaled 1,074,755 million loans, which represents almost half of all HARP refinancing since the program’s inception, which has now reached to 2,165,021 loans.
While analysts expect HARP volume will remain strong in 2013, they also forecast “a downward trend during the year.”
