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Mortgage rates hit new lows and applications to refinance fell for the third straight week. It defies logic, unless of course you operate in today’s tight mortgage market.
It’s not just about the rate anymore. Negative equity, strict underwriting and big bank backlogs are keeping many borrowers from taking advantage of these incredibly low mortgage rates.
“If history is any lesson, the only thing that can really extend refi activity in a low rate environment is a loosening of underwriting standards to bring more borrowers into the market. And that is not likely to happen anytime soon,” said Guy Cecala of Inside Mortgage Finance.
Twice this year the market did see a surge in refinancing , all due to changes in government programs.
At the beginning of the year, Fannie Mae and Freddie Mac (still under government conservatorship), expanded the Home Affordable Refinance Program for borrowers who owe more on their mortgages than their homes are worth. The limit used to be 25 percent negative equity, but in January, that limit was lifted entirely.
Then in June, the FHA changed the rules on its streamline refi program for borrowers who already have FHA loans, dropping underwriting almost entirely. While both changes sparked temporary surges, they were not enough to serve the entire market.
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