The Federal Housing Finance Agency engaged in a little back-patting yesterday for improved HARP figures, which they say are a direct result of their changes to the system to allow for more underwater borrowers to take advantage of low refinancing rates. The truth is a little murkier.

For the first five months of 2012, more than 78,000 homeowners who owe more than 105% of their property’s value have refinanced using the government’s Home Affordable Refinance Program, or HARP. That was up from about 60,000 in all of 2011, the Federal Housing Finance Agency said in a report Monday.

In May alone, 21,605 homeowners who owe more than 105% of their home’s current value completed refinances through HARP. That was up from 15,371 in April and only 4,168 in May 2011.

The Obama administration and the housing regulator rolled out several changes last fall designed to make more refinances happen. Before those changes, Fannie Mae and Freddie Mac borrowers were blocked from refinancing if they owed more than 125% of their home’s value. In addition, the housing regulator reduced the risk that banks will have to “buy back” defaulted mortgages from Fannie and Freddie if the loans are discovered to run afoul of underwriting rules.

The key comes in the highlighted section of the third paragraph. FHFA is touting that underwater borrowers above 105% LTV are getting more help with refinancing. But borrowers between 105% and 125% already had that opportunity under the old HARP. It was opening up refinancing above 125%, to basically all borrowers, that was supposed to be the real innovation here. So to properly gauge results, you have to look specifically above 125% LTV. And what does that show?

Based on this chart from Calculated Risk, 11,118 borrowers above 125% LTV got a refi in the first five months of 2012. That’s a little over 2,000 borrowers a month. For the whole country. The overwhelming majority of HARP refis are still happening for borrowers with equity, as was the case previously.

Even the numbers FHFA has massaged to tout come in “below expectations,” according to CR’s Bill McBride. He cites the startup challenges to get servicers to use the automated Desktop Underwriter to make the loans easier to refi. But he’s overlooking the way in which servicers are gaming the HARP system to squeeze their own borrowers. They have limited competition by only refinancing loans they already service. And by trapping underwater borrowers in this way, they add points to the interest rates they charge, making money off the deal, and thousands of dollars in closing costs to boot.

Additionally, many servicers have just said they will not offer refis above 125% LTV, which can be seen in the results. The Wall Street Journal reports that the numbers on HARP loans above 125% LTV could improve, “since a method to package those loans into mortgage-backed securities became available on June 1,” which is quite a horrifying scenario.

This continued gouging by servicers in use of a program ostensibly designed to help borrowers, I would argue, has led to lower takeup. It’s not like borrowers don’t talk to one another. Further evidence of this can be seen in borrowers’ reluctance to take up Bank of America on their principal reduction offers:

When Bank of America Corp. (BAC) sent letters to 60,000 struggling homeowners offering to slice an average $150,000 off their loans, the lender got an unusual response from most of them: silence.

Homeowners who fell behind on their payments began receiving the mailings in May, part of the bank’s effort to meet terms of the $25 billion industry settlement over foreclosure abuses. More than half haven’t responded as “borrower fatigue” causes them to tune out the offers, said Dan Frahm, a spokesman for the Charlotte, North Carolina-based bank.

“The number of customers responding is lower than we expected, given the significant assistance available,” Frahm said in an interview. “We are working very hard to determine why response rates are lower than expectations.”

Let me see, because you’ve abused this universe of people over and over again and they don’t trust you anymore?