by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Last week, Freddie Mac published their Mortgage Market Survey, showing that the average rate, for conforming mortgage loans originated, was under 3%. The company who performed the survey (Black Knight), figures that there are close to 20 million homeowners who can refinance now:
The company says there are now 19.3 million “high quality” refinance candidates, the largest number ever. This is 43 percent of all active 30-year mortgages. Black Knight defines a refinanceable loan as one where the homeowner has a credit score of at least 720, at least 20 percent equity in the home, and the potential for a 75-basis point reduction in their mortgage interest rate. These homeowners have potential savings averaging $299 per month, a national aggregate of $5.8 billion per month if all homeowners took advantage of the opportunity. That is the largest aggregate ever available through refinancing.
This is a stupendous amount of potential refinance candidates, maybe more than the industry has refinanced since March of this year. To put things in perspective, I have worked in real estate finance since 1997 and these past 6 months have been the hardest I have worked – ever. It means that my industry could be stretched for another 6 months.
VA and FHA both have loan programs which permit borrowers to refinance their mortgages, if they aren’t taking out money, without verifying their income – that’s a BIG deal as many borrowers have suffered income losses since they originally took out their loan. Borrowers with conventional loans though, must have their incomes re-verified for the refinance. In one respect, income verification protects lenders from making a loan to people who may/may not be able to afford it but, on the other hand, it offers no relief for borrowers who, despite the drop in income, have made their payments through thick or thin.
The regulators however, are trying to address that problem. They propose to amend the definition of a “qualified mortgage” to include those which are “seasoned” for at least 36 months. What that means to the “stuck” homeowners is that, as long as they have paid the last 36 monthly mortgage payments on-time, they may not need to have their income verified to qualify for the refinance. Black Knight thinks that could increase the potential refinance pool to 32 million; almost 3 out of every 4 active mortgages.
If you have a mortgage above 3.25%, you may qualify for refinance relief. We can only fund loans in certain states but if give me a call, I can tell you in a few moments whether or not this could help you.
