New Study Quantifies Consumer Benefit of Economic Stimulus Tied to Mortgage Rates

An estimated $11.5 billion in mortgage payment savings will accrue to U.S. borrowers over the next five years.

Courtesy: mikekazell.files.wordpress.com

(SANTA ANA, Calif.) - First American CoreLogic, a member of The First American Corporation (NYSE: FAF) family of companies and America's largest provider of advanced property and ownership information, analytics and services, today released a new study that measures the consumer impact of recent government actions to reduce mortgage rates. The study can be downloaded at facorelogic.com.

Entitled “How the U.S. Consumer Has Benefitted from Mortgage Finance Programs in 2009,” the study by Mark Fleming, Ph.D. and chief economist for First American CoreLogic, examines the effect of the Federal Reserve's interest rate reductions and government refinance programs on refinance activity and the results in increased consumer disposable income.

Using data from the First American CoreLogic public-record database, which covers 96 percent of the U.S. population, the study analyzes more than 2.2 million residential mortgage refinances that occurred between October 2008 and June 2009.

With the use of public-records data on sale and mortgage transaction activity, the First American CoreLogic study estimates the degree of debt burden reduction and the magnitude of dollars saved as a result of refinancing.

The study projects that this refinance activity will result in $2.3 billion of mortgage payment savings for borrowers who refinanced in the first six months of 2009. According to the study, the median individual monthly savings was $120, a 10.5 percent reduction from the median borrower's previous mortgage payment.

Over the next five years, the total benefit to homeowners who refinanced in 2009 will grow to $11.5 billion.

“The quantitative easing policies of the Federal Reserve and refinance activity made possible by the Home Affordable Refinance Program (HARP) have allowed more than 2 million consumers to reduce their monthly mortgage debt obligations and put more money in their pockets,” said Fleming.

“This permanent increase in monthly income is likely to, in part, be used to increase consumption and help to drive growth as the economy rebounds. Additionally, these refinanced loans are likely to be more sustainably affordable debt obligations. The combination of lower payments and fixed-rate terms should also reduce the risk of future foreclosure.”

Source: First American CoreLogic