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June 13th, 2012

With mortgage rates low, HARP refinances are rolling in



Refi ApplicationA few weeks back, Keith Gumbinger, vice president of HSH.com, explained the importance of “consistent” mortgage rates. Sure, low mortgage rates matter, but consistent mortgage rates, coupled with the fact that they’re at historic lows, keep new borrowers coming in and their contracts in place.

“A long stretch of stable-to-falling rates allows potential homebuyers the time needed to research, plan and execute a transaction to buy a home without concern of a spike in rates, which can upset deals at a moment’s notice,” wrote Gumbinger in the May 28 edition of the Market Trends newsletter.

Taking a look at the latest HARP 2.0 statistics, it’s evident that consistently-low mortgage rates are keeping the refi boom alive as well.

Mortgage rates mixed

According to HSH.com’s latest Weekly Mortgage Rates Radar, rates on the two most popular types of mortgages were mixed. The average rate for conforming 30-year fixed-rate mortgages held firm, unchanged from last week’s average of 3.81 percent. Conforming 5/1 hybrid ARM rates decreased by 3 basis points, closing the Wednesday-to-Tuesday wraparound weekly survey at an average of 2.82 percent.

“Over the last week, there was little new economic information to move mortgage rates around,” said Gumbinger. “The eurozone continues to teeter, and our own economy is struggling. The financial markets seem to be running a range of emotions, from a state of despair to that of hopeful optimism that central banks around the world will figure out a way to fix the mess. For the moment, hopeful optimism holds sway, and rates have stabilized.”

Refi boom goes beyond mortgage rates

As we’ve explained time and again, record-low mortgage rates are only beneficial if you can actually qualify for financing. And as loan officer Dan Green pointed out on his blog this morning, the continued interest in refinancing goes beyond just low mortgage rates.

“Where the original HARP fell short of expectations, HARP 2 shines,” wrote Green. “The re-release includes fewer restrictions, faster underwriting, and, in many cases, throws out the need for an appraisal. HARP 2 allows for unlimited LTV and U.S. homeowners, dogged by sagging home values since 2007, are taking advantage.”

Green says HARP 2.0 inquiries are increasing on a weekly basis. “Ample press coverage and straight word-of-mouth have helped to release a ton of pent-up demand for ‘underwater mortgages’.”

Green said he expects that interest in HARP 2.0 will only continue to grow in the months ahead. “Save for a slow start in October 2011 when few households knew what HARP and the Making Home Affordable program was, and a spike in March 2012 when the HARP 2 program rolled out nationwide, demand for the HARP refinance program has been remarkably steady.”

But how long will it last?

Gumbinger warns that given today’s historic lows, mortgage rates really have nowhere to go but up. He even says borrowers should be prepared for a possible increase in fixed rates in the coming days.

“While not yet reflected in mortgages, underlying interest rates have firmed a little bit over the past couple of days, and that trend might nudge mortgage rates higher by a little bit,” Gumbinger noted.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

Our bloggers:

Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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