Highest Mortgage Prepaid Rate Since 2005


Posted on Oct 03, 2012

Mortgages were prepaid at a higher rate in August than at any time since 2005. The August issue of Mortgage Monitorreport issued by Lender Processing Services (LPS) stated this on Wednesday. Prepayments are usually an indicator of home refinancing and the prepayments in August were higher even than those seen in the "mini-refinance waves" of both 2009 and 2010.

LPS Applied Analytics Senior Vice President Herb Blecher said that the impact of the prepayment increasehas been both pronounced and broad based.  "Our analysis showed an increase in prepayment activity across the entire combined loan-to-value (CLTV) continuum," he said. "While those loans with equity, particularly 80 percent CLTV and below, have much higher prepayment speeds, the impact of the Home Affordable Refinance Program (HARP) was also clear. Loans with a CLTV of more than 120 percent saw the greatest uptick - a 65 percent increase for the year to date.

However, it is also becoming evident that loans originated in 2007 and earlier have diminished prospects for conventional refinancing opportunities. Fewer than 30 percent of these vintages remain both active and current, and on average, they are marked by larger negative equity positions and lower credit scores. That said HARP might yet represent a viable refi option for a good portion of this pool."

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