Millions of Americans are saving billions of dollars in monthly mortgage payments, thanks to record-low interest rates. The refinance market is booming, now at 78 percent of residential mortgage activity, according to the latest read from the Mortgage Bankers Association. Make no mistake, however, the big banks are reaping great rewards as well. “Mortgage origination profitability is off the charts,” says Paul Miller, head of financial research at FBR. “Refis are surging, and many are loans that just refi-ed 6-12 months ago.” Given that so many of the refis are of relatively new loans, the banks are taking a loss in the servicing, but Miller says they usually hedge their servicing assets. The hedges, however, are not perfect and values “bounce around” in big refi booms, so the banks will take some write downs in servicing, “but the hedges will cushion the value changes,” Miller adds. Juicing the refinance market as well are big changes to the government’s Home Affordable Refinance Program earlier this year. HARP allows borrowers with Fannie Mae and Freddie Mac loans to refinance even if they owe more on the mortgage than the home is worth (so-called “underwater” loans). The changes dropped any limit to how much negative equity a borrower has in the home. It also lowered some costs. HARP volumes doubled to 180,000 in the first quarter of this year from the previous quarter, according to the FHFA. That, too, has helped the big bank servicers. “It’s hard to tell how many borrowers refi with their current servicers, but the share is up, given the demise of mortgage brokers and the advent of programs like HARP that favor the current servicer,” says Guy Cecala of Inside Mortgage Finance. Next week the FHA, the government’s mortgage insurer, will institute changes to its refinance program for current FHA borrowers, lowering fees and premiums. That should increase volumes further. While big banks may be profiting from the refinance surge, some can’t handle the volumes. It can take far longer to refinance at a larger bank than a smaller lender. “There are major staffing issues, 90-plus days for a refi at the big banks. That’s why middle market banks are doing the majority,” says Craig Strent, CEO of Bethesda, Maryland’s Apex Home Loans, a local direct lender. Wells Fargo, the nation’s largest lender, Strent admits, is the most efficient and has made it clear they want retail mortgage business. Bank of America is far less aggressive. “Most major banks are getting all the refi business they want, and can handle, at least for now,” notes Guy Cecala. “On the plus side of the surge in refi activity is that it generally improves the quality of mortgages—and servicing—since the new loans are run through tougher underwriting and often have more equity.” Questions? Comments? document.write("");document.write("RealtyCheck"+"@"+"cnbc.com");document.write('');And follow me on Twitter @Diana_Olick
Showing posts with label Borrowers. Show all posts
Showing posts with label Borrowers. Show all posts
Sunday, June 10, 2012
Refi Boom Benefits Borrowers and Big Banks
Millions of Americans are saving billions of dollars in monthly mortgage payments, thanks to record-low interest rates. The refinance market is booming, now at 78 percent of residential mortgage activity, according to the latest read from the Mortgage Bankers Association. Make no mistake, however, the big banks are reaping great rewards as well. “Mortgage origination profitability is off the charts,” says Paul Miller, head of financial research at FBR. “Refis are surging, and many are loans that just refi-ed 6-12 months ago.” Given that so many of the refis are of relatively new loans, the banks are taking a loss in the servicing, but Miller says they usually hedge their servicing assets. The hedges, however, are not perfect and values “bounce around” in big refi booms, so the banks will take some write downs in servicing, “but the hedges will cushion the value changes,” Miller adds. Juicing the refinance market as well are big changes to the government’s Home Affordable Refinance Program earlier this year. HARP allows borrowers with Fannie Mae and Freddie Mac loans to refinance even if they owe more on the mortgage than the home is worth (so-called “underwater” loans). The changes dropped any limit to how much negative equity a borrower has in the home. It also lowered some costs. HARP volumes doubled to 180,000 in the first quarter of this year from the previous quarter, according to the FHFA. That, too, has helped the big bank servicers. “It’s hard to tell how many borrowers refi with their current servicers, but the share is up, given the demise of mortgage brokers and the advent of programs like HARP that favor the current servicer,” says Guy Cecala of Inside Mortgage Finance. Next week the FHA, the government’s mortgage insurer, will institute changes to its refinance program for current FHA borrowers, lowering fees and premiums. That should increase volumes further. While big banks may be profiting from the refinance surge, some can’t handle the volumes. It can take far longer to refinance at a larger bank than a smaller lender. “There are major staffing issues, 90-plus days for a refi at the big banks. That’s why middle market banks are doing the majority,” says Craig Strent, CEO of Bethesda, Maryland’s Apex Home Loans, a local direct lender. Wells Fargo, the nation’s largest lender, Strent admits, is the most efficient and has made it clear they want retail mortgage business. Bank of America is far less aggressive. “Most major banks are getting all the refi business they want, and can handle, at least for now,” notes Guy Cecala. “On the plus side of the surge in refi activity is that it generally improves the quality of mortgages—and servicing—since the new loans are run through tougher underwriting and often have more equity.” Questions? Comments? document.write("");document.write("RealtyCheck"+"@"+"cnbc.com");document.write('');And follow me on Twitter @Diana_Olick
Monday, February 6, 2012
President Obama Proposes Mortgage Refinances for 'Responsible Borrowers'
After several largely ineffective programs to help troubled borrowers and after fruitless attempts at budging the hard-line conservator of Fannie Mae and Freddie Mac, President Obama is proposing a brand new refinance program for borrowers who are current on their mortgages, regardless of who owns their loan; the catch is that this one has to go through Congress.
"I'm sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates. No more red tape. No more runaround from the banks," the President announced in his State of the Union address.Unlike previous efforts in the refinance space, including a recently revamped and expanded government program for borrowers who owe more on their mortgages than their homes are currently worth, this plan would not be limited to those with loans backed by Fannie Mae and Freddie Mac, according to senior administration officials. The two mortgage giants own or guarantee about half of the nation's mortgages. It would be open to all borrowers current on their loans.The Obama administration is offering precious few details, promising more in the coming weeks, but several sources say the plan is to ask Congress to allow the government mortgage insurer, the Federal Housing Administration (FHA), to back refinances of underwater mortgages. No estimates were given as to how many borrowers such a plan could potentially help, only that this would be a voluntary, borrower-initiated plan, and not a blanket refinance of all borrowers.The costs, according to administration officials, would be modest, and the President would request that a portion of his financial crisis responsibility fee offset any of those costs, so there would be no addition to the federal debt. "A small fee on the largest financial institutions will ensure that it won't add to the deficit, and will give banks that were rescued by taxpayers a chance to repay a deficit of trust," Mr. Obama added.Loan servicers could be faced with a flood of applications and could have to add resources to handle it all, but officials say the opportunity to generate revenues from the refinances would be incentive enough. Still many servicers have balked at the idea of mass refinancing, as the new loans could present more risk and less reward.The idea is to remove the barriers and "frictions" that have kept many borrowers out of refinancing to historically low rates. Some of those include high levels of negative equity, loan level price adjustments, loan origination dates, put-backs on loans that default, and borrower qualifications. Then there is the very basic problem of politics. Whatever the details of the plan are, Republicans, despite the fact that they have been calling for more refinances, are unlikely to hand President Obama a popular victory on the eve of a presidential election. They may also oppose anything that makes Fannie Mae and Freddie Mac bigger, when the two are allegedly winding down.Questions? Comments? document.write("");document.write("RealtyCheck"+"@"+"cnbc.com");document.write('');and follow me on Twitter @Diana_Olick![]()
"I'm sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates. No more red tape. No more runaround from the banks," the President announced in his State of the Union address.Unlike previous efforts in the refinance space, including a recently revamped and expanded government program for borrowers who owe more on their mortgages than their homes are currently worth, this plan would not be limited to those with loans backed by Fannie Mae and Freddie Mac, according to senior administration officials. The two mortgage giants own or guarantee about half of the nation's mortgages. It would be open to all borrowers current on their loans.The Obama administration is offering precious few details, promising more in the coming weeks, but several sources say the plan is to ask Congress to allow the government mortgage insurer, the Federal Housing Administration (FHA), to back refinances of underwater mortgages. No estimates were given as to how many borrowers such a plan could potentially help, only that this would be a voluntary, borrower-initiated plan, and not a blanket refinance of all borrowers.The costs, according to administration officials, would be modest, and the President would request that a portion of his financial crisis responsibility fee offset any of those costs, so there would be no addition to the federal debt. "A small fee on the largest financial institutions will ensure that it won't add to the deficit, and will give banks that were rescued by taxpayers a chance to repay a deficit of trust," Mr. Obama added.Loan servicers could be faced with a flood of applications and could have to add resources to handle it all, but officials say the opportunity to generate revenues from the refinances would be incentive enough. Still many servicers have balked at the idea of mass refinancing, as the new loans could present more risk and less reward.The idea is to remove the barriers and "frictions" that have kept many borrowers out of refinancing to historically low rates. Some of those include high levels of negative equity, loan level price adjustments, loan origination dates, put-backs on loans that default, and borrower qualifications. Then there is the very basic problem of politics. Whatever the details of the plan are, Republicans, despite the fact that they have been calling for more refinances, are unlikely to hand President Obama a popular victory on the eve of a presidential election. They may also oppose anything that makes Fannie Mae and Freddie Mac bigger, when the two are allegedly winding down.Questions? Comments? document.write("");document.write("RealtyCheck"+"@"+"cnbc.com");document.write('');and follow me on Twitter @Diana_OlickTuesday, January 4, 2011
BORROWERS - DVD Movie
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