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Mortgage Refinancings Set to Surge to a 17-Year High

 

iLeads Mortgage Market Minute

Welcome back to iLeads Mortgage Market Minute, where we bring you the latest, most relevant news regarding the mortgage market. We hope you enjoyed last week’s edition where we talked about It Hasn’t Been This Hard To Get a Mortgage in More Than Five Years. This week we’re bringing you:

 

May NAHB housing market index stronger than expected*

CNBC’s Diana Olick reports on the latest NAHB housing market index numbers for the month of May.

 

Congressional Budget Office projects GDP will decline by 38% in second quarter*

CNBC’s Steve Liesman reports the latest numbers from the Congressional Budget Office on their forecast for the U.S. economy.

 

Mortgage refinancings set to surge to a 17-year high*

Lenders probably will originate $1.5 trillion in refis, a 51% jump from 2019, Fannie Mae says

If you’re in the mortgage business, fasten your seatbelts. Refinance volume is set to spike to a 17-year high this year as mortgage rates fall to the lowest levels ever recorded, Fannie Mae said.

Even as other parts of the economy tank, lenders will originate $1.5 trillion in refis in 2020, a 51% jump from 2019, according to the forecast. That would be the highest level since 2003 when $2.5 trillion of mortgages were refinanced, according to data from the Mortgage Bankers Association.

The lowest interest rates on record will bolster refis after the Federal Reserve began buying mortgage-backed securities to stimulate bond demand and grease the wheels of the credit markets. The average U.S. rate for a 30-year fixed mortgage fell to an all-time low of 3.23% at the end of April, according to Freddie Mac.

It’s probably heading even lower, according to the Fannie Mae forecast. The average rate probably will be 3.2% in the second quarter, down from 3.5% in the first quarter, and drop for the rest of the year. Read more in-depth here.

 

Fannie Mae, Freddie Mac will allow borrowers who took forbearance to refinance their mortgage*

GSEs also extended their timeframe for buying loans that went into first-payment forbearance

The most recent data shows that there are approximately 4.1 million borrowers in forbearance on their mortgage, but a lack of clarity in the wording of the CARES Act was leaving many of those borrowers unable to take advantage of the recent record lows in interest rates.

But that’s not the case anymore.

The Federal Housing Finance Agency announced Tuesday morning that Fannie Mae and Freddie Mac will now allow borrowers who went into COVID-19 forbearance to refinance their loan or buy a new home with the support of the GSEs as long as they’ve made three straight months of payments after their forbearance ends.

That’s much different from the previous thinking that a borrower may not be able to get another GSE mortgage for as many as 12 months after they exit forbearance.

The CARES Act stipulates that mortgage servicers “shall report the credit obligation or account as current” on any loan that goes into COVID-19-related forbearance. Read more in-depth here.

 

22% of Builders Reduced Home Prices in April 2020*

The housing market did not escape the pain and contraction experienced by the US economy in April 2020 as a result of the lockdown orders issued by state and local governments to mitigate the effects of the COVID-19 pandemic. Builder confidence posted a historic decline and there were broad declines for housing starts.

In recent weeks, there has been anecdotal evidence about builders lowering home prices, but the latest NAHB/Housing Market Index (HMI) survey provides factual data: nationally, about 22% of builders cut home prices in April 2020 in order to bolster sales and/or limit cancellations. Regionally, builders in the South (26%) and Midwest (23%) were the most likely to have reduced prices, compared with much smaller shares in the West (13%) and Northeast (12%). Read more in-depth here.

 

70% Of Homeowners Seeking Mortgage Relief Don’t Actually Need The Help*

More than 4 million homeowners have now been granted forbearance on their mortgage loans. But in 70% of those cases? The homeowners didn’t actually need the break.

According to a new study from LendingTree TREE, almost 70% of homeowners now in forbearance say the move wasn’t necessary — financially speaking, at least. In fact, only a mere 5% of those granted forbearance say they wouldn’t be able to make their mortgage payments without it.

So what’s causing the rush toward mortgage relief, then? Data from the Mortgage Bankers Association shows that more than 8% of all mortgage loans are now in forbearance, allowing homeowners to pause monthly payments for up to 12 full months.

Apparently, many of these homeowners simply “wanted a break from their normal payments,” according to LendingTree’s findings. This mindset was most common with Millennial and Generation X homeowners — of whom just 4.3% actually needed the financial help. Read more in-depth here.

 

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