Low Interest Rates to Boost Home Mortgage Refinancing
Home mortgage refinancing will get a boost this year as low interest rates are expected to entice homeowners to refinance their existing loans.
The expected increase in mortgage refinancing deals will also give a boost to banks and other financial servicers that are waiting for the recovery of the housing market.
Projection of the Mortgage Bankers Association (MBA) indicated an increase for home loan refinancing in 2009 from $800 billion to as much as $2.78 trillion.
MBA warned that 2009 could pose the fourth highest record for home mortgage refinancing, after consecutive years of 2002 and 2003 and then, 2005.
It is expected that the increase in home mortgage refinancing will come from distressed homeowners who will refinance their existing home mortgage loans to take advantage of reduce interest rates.
Federal programs intended to give life to the languishing housing market are also expected to boost loan originations.
On the other, mortgage loans on homes acquired are projected to decline from $854 million last year to about $821 million this year.
Sandler O’Neill and Partners analyst Kevin Fitzsimmons believed that revenue from mortgage fees will increase in the first quarter of this year due to a boost in home mortgage refinancing.
Banks operating a mortgage lending business such as Bank of America, JPMorgan Chase, SunTrust and Wells Fargo are expected to take advantage of home mortgage refinancing deals.
However, Fitzsimmons cautioned that refinancing activities may be affected by the heavy credit losses and writedowns that major banks are currently dealing with.
Meanwhile, JPMorgan Chase has provided billions in credit but the constricted credit markets are hindering its ability to offer loans.
According to Jay Brinkman, chief economist of MBA, the current loan origination will serve as a test on the operational capability of several mortgage banks.
He noted that the limited availability of credit lines could restrict the ability of several mortgage bankers to deal with the volume of refinancing in a short time period.
He added that some loan officers who are working on retail branch offices may experience capacity burdens due to the closing of several independent brokers affected by the housing crisis.
Mortgage lenders have restricted their lending rules and will also scrutinized minutely documents and appraisals submitted by borrowers.
