With interest rates near historic lows, the banking industry is seeing an increase in mortgage refinancing, although not as many are refinancing as the record level seen before the current economic crisis.
Mortgage Bankers Association reports the refinance share of mortgage activity rose to 74.8% of total applications for the week ending June 11, up from 72.2% the previous week, the highest since Dec. 18 as homeowners took advantage of the low interest rates. Mortgage company Freddie Mac says the average rate for a 30-year, fixed-rate mortgage is 4.75% as of last week, up slightly from 4.72% the previous week. This time last year, the same mortgage rate was 5.38%.
The heyday of mortgage refinancing was in 2003, says a preliminary report released in April by the Obama administration's Financial Crisis Inquiry Commission. That year, 15 million mortgages were refinanced -- one out of every three U.S. home mortgages.
But some lenders say even with attractive rates now, homeowners can't refinance because their homes have dropped in value and stricter requirements make it harder to get refinancing approvals. "There are more and stricter requirements for loans today, so it's not as easy for everyone to refinance their mortgages," Don Oakes, Mortgage South president, told the Chattanooga Times Free Press.
Refinancing rules will be among the issues taken up Tuesday as U.S. House and Senate negotiators work on the massive financial reform bill. The proposed rules would require lenders to make sure a borrower is able to repay a home loan before originating a home loan as well as ensure that refinancing an existing loan is in the consumer's financial interest, says Dow Jones Newswires.
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