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Three Pieces of Refinance News That Matter This Week

[Sep 16, 2009.]


Refinance news saw another busy week.

Here are three pieces of refinance news that matter this week:

1. Mortgage Rates Tick Up Slightly

In a refinancing environment in which every fraction of a point can potentially make a difference, news that 30-year mortgage rates went up slightly this week constitutes big news for refinance borrowers who are close to qualifying but not quite there yet.

According to Calculators4Mortgages.com, the monthly payment on a 30-year fixed rate refinance of a $400,000 loan at 5.17 percent comes in at $2,189.

While a $400,000 mortgage refi at 5.37 percent--just one fifth of a point higher--results in a monthly payment of $2,239.

For some borrowers, that $50 extra per month doesn't much matter. But for borrowers who are close to the line in terms of debt-to-income ratio, every fifth of a point counts.

2. Mortgage Modification Program Statistics Begin to Circulate

Mortgage modification programs affect refinancing because they affect home prices; more foreclosures only hurts home values, which in turn hurts refinance options.

Now, stats on which banks are doing well with modification programs are out there in the form of comprehensive articles like this one over at Bloomberg. More information about which banks are doing lots of modifications and which ones aren't puts public pressure on the banks that aren't.

So far, JPMorgan (23 percent) and Citibank (25 percent) are doing a much higher percentage of loan mods than Bank of America (7 percent) and Wells Fargo (11 percent).

However, Wells Fargo has increased its modifications by 64 percent over the last 30 days.

3. Obama Tells Wall Street Lending Better Increase Soon

It is impossible, or at least naive, to discuss refinance news outside of the context of the larger issue of bank lending in general. Yes, lending by banks that is based upon the security of a home is a different product than lending on a credit card, but the bottom line is that lending and lending.

And this week, President Obama visited Wall Street in person to tell Wall Street bankers that lending to individuals and businesses had better increase soon because Wall Street owes a "debt" to the American taxpayer and the American government.

Obama seems to view bank lending, at least at this point in time, as a sort of moral obligation.

Whether or not this view is correct is quite immaterial to the fact that publicly calling out lenders in this manner may in fact produce increased lending. That's good news for borrowers looking to refinance.


About Author:

Andrew Freiburghouse is a writer and businessman. He has worked as a magazine reporter, tax preparer, screenwriter, copywriter, and loan officer. He graduated from Santa Clara University in 1999 with a B.A. in English. Andrew was born and raised in the City of Los Angeles.

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