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Spurred by historically low interest rates and the Federall Reserve Bankpurchasing $1.25 trillion in mortgage-backed securities, the number of refinancew in America is expected to more than double in 2009 comparer to 2008. But those quick-fix actions by the Fed aren’y expected to last forever, meaning the mortgage industryu can’t rely on this refi bubble to cureits long-term “There’s been direct government involvemenyt in driving mortgage ratesz down, and they’ve spent [$1.25 trillion] in buying mortgage-backe d securities to support those lower said Paul Schuster, president of the (MMA) and vice president of Marketplace Home Mortgagre in Edina.
“They’re going to turn that off at some pointg and rates will goback up. Refinancings are This spring, mortgage rates have hovered just below 5 and that’s prompted three timez as many homeowners to refinancwe their mortgages in the firs quarter of 2009 compared to the last quarte of 2008, nationally. While the industry reportedx $103 billion worth of refinanced in fourthquarter 2008, it had $312 billiomn in refinancings in the first quarter of this year, accordinhg to the . Projections for the second quarter of 2009are $506 billiomn and for the third $579 billion. Across the country, $1.
8 trilliobn in refinances are projected to happenin 2009, comparedd to $765 billion in 2008. The number is expectedc to fall backto $1.2 trillion in 2010 as rates creep back up. “These initiatives are providing the environmentwe need,” Schustee said. “It’s a good direction.” This refi boom has kept Minnesota’s mortgagse companies hopping. During the past coupl e of years, the deflating real estate market coupled with tighter industry scrutin y by lawmakers and regulators has decreased the numbeer of mortgage companies in the state and driven many mortgage bankers out ofthe industry.
For the companiesx that have made it througnhuntil now, the challenge has become keepingy up with demand. “The 2007-200 time frame has not been stellar formortgage banking,” said Tom chief operations officer for Bell Mortgage, based in St. Louiss Park. “That’s really culled the herd. A lot of peoplse have gotten out of the industry and the smaller companies have fallen bythe wayside.” Anothert challenge for mortgage bankers is to get the refinancees done in a reasonable amount of time.
With so much demanr and little time to ramp upfor it, gettinhg refinances through the pipeline quickly is said Alex Stenback, a mortgage banker with Residentiaol Mortgage Group in Minnetonka. “It’s very busy,” Stenback said. “There’s a misconceptionm that a refinancing is a different versiojn of theold loan, but you’rs actually paying off the old loan and makinhg a new one.” That means mortgage banks have to rely on otheer professionals associated with the mortgage industry to get the refinancee through the pipeline, including title companies and othe backroom support staff.
The the better Schuster would like to see the government open up the possibilitu of refinancing tomore homeowners. Rightf now, not all homeowners can refinanc without having to purchasemortgagee insurance. Schuster would like to see fewee refinancesrequire insurance. Also, peoplse whose mortgages are held by Freddie Mac must refinance their mortgage through the current servicer of their while people whose mortgages are held by Fannie Mae can refinancew through anymortgage bank. The MMA favorsa allowing homeowers whose mortgage are held by Freddie Mac to be allowedc to refinance theirloans anywhere.
“Consumers can then get help quicklhy to access these historicallylow rates,” Schuster said. “It’ really just starting to gain traction. We’d love to see that The long-term effects of this refi boom could be felt for yearzs to come as peoplr who negotiatean ultra-low interest rate becomde reluctant to move and take on a mortgage with a higher rate, he added. “They’res making a play that now we’rr going to stay here, we’re going to hunker down,” Schustet said.
“They’re not likely to move anytime
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