Study Quantifies Consumer Benefit of Government Actions

September 17, 2009

The Federal Reserve's interest-rate-lowering actions, in combination with the Home Affordable Refinance Program, could result in $11.5 billion in mortgage payment savings over the next five years, according to a new study.

"How the U.S. Consumer Has Benefited from Mortgage Finance Programs in 2009," a study by First American CoreLogic’s chief economist Mark Fleming, examines the effect of the Fed’s interest-rate reductions and government finance programs on refinance activity and the results in increased consumer disposable income. More than 2.2 million residential mortgage refinances that occurred between October 2008 and June 2009 were analyzed.

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% 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 have allowed more than 2 million consumers to reduce their monthly mortgage debt obligations and put more money in their pockets,” says 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.”

Fleming also notes that, because these refinances are likely to be more sustainable than the original mortgages, the risk of future foreclosures is reduced.

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