Recent HARP Refis Exhibit Lower Credit Quality, Lower Balances

The pool of high-balance, high-credit quality GSE loans have already been refinanced via the Home Affordable Refinance Program, according to analysts at Bank of America Merrill Lynch.

The remaining eligible borrowers have “lower loan balances and FICO scores,” according to the Bank of America Merrill Lynch “Securitization Weekly” report.

The MBS analysts also note the loan sizes of HARP refinances have “declined steadily” as the “pool of better credit borrowers has already been refinanced,” the Aug. 2 report says.

The Bank of America Merrill Lynch analysts expect HARP activity will remain elevated through 2013 and possibly early 2014 before the major servicers burn through their remaining pool of eligible Fannie Mae and Freddie Mac loans.

Due to the decline in traditional refinancing activity, the servicers will have ample capacity to “accelerate burnout,” the report says.