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Millions of Americans are saving billions of dollars in monthlymortgage payments, thanks to record-low interest rates. The refinance market is booming, now at 78 percent of residentialmortgage activity, according to the latest read from the MortgageBankers Association. Make no mistake, however, the big banks are reaping great rewardsas well. Mortgage origination profitability is off the charts, says PaulMiller, head of financial research at FBR. Refis are surging, andmany are loans that just refi-ed 6-12 months ago. Given that so many of the refis are of relatively new loans, thebanks are taking a loss in the servicing, but Miller says theyusually hedge their servicing assets. The hedges, however, are notperfect and values bounce around in big refi booms, so thebanks will take some write downs in servicing, but the hedgeswill cushion the value changes, Miller adds. Juicing the refinance market as well are big changes to thegovernment s Home Affordable Refinance Program earlier this year.HARP allows borrowers with Fannie Mae and Freddie Mac loans torefinance even if they owe more on the mortgage than the home isworth (so-called underwater loans). The changes dropped anylimit to how much negative equity a borrower has in the home. Italso lowered some costs. HARP volumes doubled to 180,000 in thefirst quarter of this year from the previous quarter, according tothe FHFA. That, too, has helped the big bank servicers. It s hard to tell how many borrowers refi with their currentservicers, but the share is up, given the demise of mortgagebrokers and the advent of programs like HARP that favor the currentservicer, says Guy Cecala of Inside Mortgage Finance. Next week the FHA, the government s mortgage insurer, willinstitute changes to its refinance program for current FHAborrowers, lowering fees and premiums. That should increase volumesfurther. While big banks may be profiting from the refinance surge, somecan t handle the volumes. It can take far longer to refinance at alarger bank than a smaller lender. There are major staffing issues, 90-plus days for a refi at thebig banks. That s why middle market banks are doing themajority, says Craig Strent, CEO of Bethesda, Maryland s ApexHome Loans, a local direct lender. Wells Fargo, the nation slargest lender, Strent admits, is the most efficient and has madeit clear they want retail mortgage business. Bank of America is farless aggressive. Most major banks are getting all the refi business they want, andcan handle, at least for now, notes Guy Cecala. On the plusside of the surge in refi activity is that it generally improvesthe quality of mortgages and servicing since the new loans arerun through tougher underwriting and often have more equity. I am an expert from ceramicdentallaboratory.com, while we provides the quality product, such as China Diagnostic Wax Up , Cosmetic Dental Veneers Manufacturer, Dental Zirconia Crowns,and more.
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