Important Refinancing Changes
Looking to increase the mortgage refinance volume, FOMC has decided to extend the duration of Fed’s balance sheet and reinvest that money into MBS, in hopes that it will increase the refinance volume and savings for borrowers.
In addition, the Federal Housing Finance Agency (FHFA) indicated that they will be attempting to reform a few policies that stand in the way of the refinance volume. This could include changing the Home Affordable Refinance Program (HARP) to expand uptake in the program, potentially expanding borrower’s eligibility with loan-to-value ratios of greater than 125% (which is the current limit), reducing and/or eliminating the pricing adjustments related to borrower risk and addressing the portability of mortgage insurance, which could possibly provide relief from put-back risk to banks who originate loans backed by GSEs.
This decision may shift the market’s focus away from policy-induced refinancing toward rate-induced. With these two possible factors affecting additional refinancing activity, there are three factors that will most likely determine the amount of additional volume we should expect: primary mortgage rates, non-price considerations and originator/lender capacity.
Keep your eye on all these factors as these ideas may start to take place and begin to affect our refinancing volume.