By Mike Colpitts
The Obama administration’s long criticized Home Affordable Mortgage Program (HAMP) showed a major improvement last week, pushing 
refinances for underwater homeowners higher, according to the Mortgage Bankers Association.
“Although total application volume dropped on an adjusted basis relative to last week, refinance volume remains high, with survey participants reporting that the expanded Home Affordable Mortgage Program (HAMP) contributed to roughly 10% of their refinance activity,” said MBA’s chief economist Michael Fratantoni.
The jump in HAMP underwater refinances was the first sign yet that a new program instituted by the government eliminating loan to value limits was beginning to attract more homeowners to refinance underwater mortgages. The program went into effect towards the end of last year.
However, refinancing composed a smaller volume of the overall mortgage market as consumers turned out to take advantage of record low mortgage rates. The share of refinance activity dropped to 80% of mortgage applications, a drop from 81.3% of activity from the previous week.
Total applications fell 2.9% from the prior week, the bankers’ survey which accounts for about 75% of all U.S.mortgage applications showed.
Connecticut had the largest increase in refinance applications during the month of December. Maine saw a 30.8% jump in applications for home purchases, which was the largest state-increase in applications for home purchases. Just 12 states had a drop in home purchase activity during December, while every state experienced a rise in refinance volume.
The average fully contracted mortgage rate on a 30-year fixed rate loan dropped to 4.09% from 4.11% for the week on 80% loan-to-value mortgages. However, FHA mortgages, which more consumers are purchasing these days because of their lower rates and more lenient qualifying standards dropped to an average of 3.96% on the 30-year fixed rate.
The 15-year fixed rate mortgage decreased to an average of 3.36%, a four basis point drop from a week earlier.