Tuesday, October 9, 2012

Ben Bernanke's Mortgage-Refi Nation

Well, that didn’t take long. It’s been less than a month since the Federal Reserve announced plans to buy $40 billion of mortgage-backed securities a month for as long as necessary to spur lending and boost employment. Since then, mortgage interest rates have fallen to the lowest level on record—the average 30-year loan stood at 3.53 percent as of Sept. 28—driving refinance applications to jump to their highest level since 2009, according to the Mortgage Bankers Association.

Borrowers are refinancing at an annualized rate of 22 percent, according to Lender Processing Services (LPS). At this rate, more than one in five borrowers will refinance over the next year. Borrowers who have at least 20 percent equity in their homes are even more likely to refinance. Among those homeowners, one in three will refinance in the next year if the current pace continues.

Refinancing is normally not an option for borrowers who owe more than their home is worth. But they’ve have been getting into the act this year, thanks to the Obama administration’s Home Affordable Refinance Program, which rewards banks for working with underwater homeowners. Since the start of 2012, there’s been a 65 percent increase in refis for borrowers who owe at least 20 percent more than their homes are worth; HARP now accounts for about a quarter of all refis. Read more....


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