Refi Boom Hits a Wall
Yesterday the American Banker reported that the mini boom in mortgage refinancing that began in December and continued in January hit a wall in February as long term interest rates started to rise again. Fannie Mae and Freddie Mac had also raised loan to value and credit score requirements and these factors reduced the number of potential refi customers.
Ironically it has been hard for some mortgage companies to handle the uptick in refi applications because of cuts they had made as a reaction to the housing market slowdown. These capacity problems could be eased by Xerox Mortgage Services which speeds up mortgage processing by enabling lenders and others to share and work with mortgage documents electronically.
As the Fed. continues to reduce interest rates over the coming months I expect there will be another increase in refis provided that long term rates also come down. These lower rates may also start to free up the logjam in unsold houses and kick-start new loan applications although I suspect that will take more time.
