Late last month, the Mortgage Bankers Association increased its forecast for national mortgage originations by $800 billion to $2.78 trillion. The organization said that 2009 could become the fourth-highest year for originations, behind only the housing boom years of 2002, 2003 and 2005. Most of that is from borrowers refinancing existing loans rather than new purchases. Mortgages on new homes are expected to decline this year to $821 million from $854 million in 2008, the MBA said.
For the week that ended April 3, the MBA said that about 78 percent of mortgage applications came from refinancings rather than purchases.
Unlike the housing boom of a couple years ago, this new growth was engineered by the government to heal the sector. The Federal Reserve last month committed to buy up to $1.2 trillion in mortgage-backed securities and $300 billion in long-term government debt, which has pushed mortgage rates to record lows.
Now, some lenders that were forced to lay off personnel in the past year are looking to add staff to cope with the increased volume....
Jim Linnane, Wells Fargo & Co.’s northeast division manager for retail lending, said refinancing application rates are three to four times normal levels. In 2008, purchases and refinancings were split evenly; now the ratio is 25 percent purchases to 75 percent refinancings.
Just remember that refinancing requirements are more stringent than ever. One needs equity, a high credit score and the ability to show all documents. But it is well worth the savings that many who refinance are getting.