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35 » VISIT US ONLINE @ DSNEWS.COM REFI VOLUME RISING WHILE HARP NUMBERS KEEP FALLING Low mortgage interest rates helped elevate refinance volume throughout the third quarter of 2014 as demand for the government's relief refinance program continued to diminish. Together, Fannie Mae and Freddie Mac reported 389,284 refinances throughout the third quarter of 2014, according to their conservator, the Federal Housing Finance Agency (FHFA). e figure compares to a total of 344,507 in the second quarter last year. e boost came as mortgage rates remained more or less stable in the 4.1–4.2 percent range, well below averages seen throughout the early second quarter. With rates now hovering around 4 percent, refinancing activity for the fourth quarter is well-positioned to beat out 2013's slump. As refinance volumes rose, the share of refinances completed through the government's Home Affordable Refinance Program (HARP) fell further, according to FHFA. e agency's report shows HARP refinances totaled 44,136 throughout Q 3, representing about 11 percent of total refinances. In Q2, HARP refinances totaled 54,040, about 16 percent of total refinance numbers. Since the program first kicked off in 2009, FHFA estimates HARP refinances have topped 3.2 million. However, interest in the program has steadily fallen in the last year, with the total number of 2014 HARP refinances looking to hit only about one-third of last year's total—even as FHFA continues its initiative to boost borrower awareness by hosting town hall-style events in certain hard-hit markets. By FHFA's estimate, there are more than 722,000 borrowers who have a "strong financial incentive" to refinance, especially with mortgage rates at historical lows. With many Americans paying 1.5 percentage points more in interest than the current market average, the agency estimates those borrowers could save an average of $200 per month on their mortgage payments. Despite its failing popularity nationwide, HARP refinances continue to account for a sizable share of refinances in certain states. Year- to-date through September, HARP represented 33 percent of total refinances in Georgia and 31 percent of refinances in Florida, nearly double the nationwide share of 16 percent. HARP numbers also remain relatively strong among underwater borrowers. According to FHFA, 7,577 of Q 3 HARP refinances were for consumers with loan-to- value ratios ranging from 105–125 percent, while 4,124 were for mortgages with loan-to-value ratios higher than 125 percent. While both numbers were down slightly from the second quarter, they compare to a much bigger drop in HARP activity among borrowers with 80–105 percent loan-to-value ratios. FED REPORTS CONTINUED GROWTH IN FINAL BEIGE BOOK OF 2014 Federal Reserve officials released last year their final summary of economic conditions in 2014, ending the year on an upbeat note with reports of continued growth. In its latest Beige Book—a catalog of economic reports from contacts across all 12 Fed districts—the central bank noted that "national economic activity continued to expand in October and November." Missing from the latest phrasing is the Fed's usual qualifier, which typically describes growth as "modest to moderate." e change could signal a more optimistic outlook from policymakers, who voted in October 2014 to end the central bank's most recent round of quantitative easing and who are now faced with the prospect of raising interest rates. e report also found that contacts in many districts "remained optimistic about the outlook for future economic activity." Contacts reported improvements across all economic segments in most districts, though indicators were mixed regionally. In the housing arena, both construction and real estate activity expanded overall in the last two months, with a "fair amount of variation" across sectors. Homebuilding increased on balance across the country, though the multifamily side of the market remained stronger than the single-family side in several districts. Of particular note, the Dallas district saw an increase in construction-related lending, with strength reported in loans for both single-family and multifamily projects. About half of the districts reported an increase in home sales, according to the Fed, though that also leaned more toward the multifamily sector in many districts. Home prices were little changed in most regions, excepting the Richmond, Atlanta, Dallas, and San Francisco districts. On the financing side, lending held steady or increased across most areas, with a few districts reporting more aggressive competition on loan pricing and terms and an easing in lending standards. Home mortgage lending was up in a number of regions, "reflecting a mix of new mortgages, refinancings, and home equity lines of credit," the Fed said. However, the environment remains tough for first-time homebuyers, particularly in the Cleveland and Richmond districts, where hopeful borrowers continued to face challenges qualifying for a loan. e Fed also added that contacts in the Boston area were optimistic that the new Qualified Residential Mortgage rule would help boost lending volumes. Other economic signs were similarly encouraging. In the labor market, employment gains in the past two months were widespread across the nation, though contacts in some districts reported continued difficulties filling roles in skilled positions. Hiring plans increased in New York, Chicago, and St. Louis, according to the Fed, and firms in Kansas City and Dallas reported difficulties retaining key workers as labor market conditions strengthened. Percentage of year-over- year increase in the number of foreclosure starts in the U.S. in November 2014 (a total of 55,906), ending a string of 27 consecutive months of year-over-year declines. Source: RealtyTrac STAT INSIGHT 6

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