The surge in refinancing, now down to a virtual trickle, was officially pronounced dead and gone at the Mortgage Bankers Association's annual secondary market conference in New York.
"We've lost borrowers who have the ability (to refinance) and those who have the ability no longer have the incentive," Michael Fratantoni, the MBA's director of research and economics, told the meeting.
While the market is "close to the turnaround point" in purchase mortgage volumes, Fratantoni said, "the refi portion is essentially over."
The share of borrowers with loans at rates above 5.5% either don't have jobs, have lost too much equity or have poor credit, the MBA economist explained. Or they simply don't want to refinance for some unknown reason.
While the loss of easy loans is a blow to lenders, it is good news to servicers who are impacted by the loan runoff. But servicers also received a bit of bad news from the MBA's chief economist, Jay Brinkman, who pointed out that mortgage debt outstanding is continuing to fall. Worse, he said, the "likelihood of a turnaround is not good." And the anticipated increase in purchase volumes "may not be enough" to replace the loss.
According to data gleaned from the group's weekly applications survey, the mortgage business has settled down into a "plain vanilla market." But the pattern of refinances indicates that the composition of those loans is changing, as borrowers opt to "de-leverage" with shorter payback periods, leading to the decline in debt outstanding, Fratantoni pointed out.
Nearly 24% of those who refied went with a 15-year amortization period, and almost 12% more took loans with durations of 10 years or less.
This article is from National Mortgae News/Lew Sichelman