Refinancings of Fannie Mae and Freddie Mac loans with LTV ratios above 125% surged in June as lenders were able to securitize and sell these severely underwater loans for the first time, according to a new report by the GSE regulator.

The Federal Housing Finance Agency said Tuesday that the GSEs refinanced 53,758 mortgages in June with loan-to-value ratios north of 125% -- up from just 2,950 units in May.

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