Taking advantage of the low interest rate environment, Regions Financial Corp. (RF - Free Report) helped around 6,000 homeowners refinance their mortgages under the government’s Home Affordable Refinance Program (HARP). The program is scheduled to continue till December 2013.
Under the HARP initiative, homeowners having their loans owned by Fannie Mae (FNMA - Free Report) or Freddie Mac are eligible to refinance these at lower interest rates despite considerable reduction in the values of such loans. Many homeowners were not able to meet the criteria under the previous edition of HARP, which was introduced in 2009, since the loans were not allowed to be more than 125% of the value of the property.
HARP facilitates ineligible homeowners to use other refinancing benefits. Also, it provides uncomplicated paperwork for loan-processing and opportunities to make the refinancing process easier with an existing loan-servicer or lender. Moreover, the program reduced fees and removed the risk-based fees for short-term mortgage borrowers.
Earlier this month, Regions refinanced more than $1 billion worth of loans, thus meeting its refinancing target for this year. Further, the bank introduced two new operations centers along with additional staff to help accelerate the entire process.
While almost 60% of HARP refinances were done by Regions from March to August 2012 for existing customers, the rest were made for non-customers. Moreover, a customer refinancing through Regions will be able to save about $285 monthly.
Regions’ refinancing activities enhanced its mortgage revenues by 17% sequentially. Further, its mortgage production for the second quarter was $2.1 billion, recording a 28% hike from the prior quarter. Regions’ peers include Middleburg Financial Corporation and ECB Bancorp Inc.
Regions retains a Zacks #2 Rank, which translates into a short-term Buy rating. However, considering the fundamentals, we maintain a long-term Neutral recommendation on the stock.