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.

Freddie outpaced its rival for June: 33,073 to 20,685.

Starting June 1, lenders could sell Fannie and Freddie MBS containing the high LTV loans under the HARP 2.0 refi program.

Overall, HARP refinancings of GSE loans with LTV above 80% totaled 125,870 in June, an 80% improvement from May.

HARP refinancings of loans with 105% to 125% LTVs hit 24,350 in June, up 30% from May.

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