The view from this room.
More than 60% of borrowers with a 30-year fixed-rate mortgage could reduce their mortgage rate by one percentage point, up from 42% at the beginning of August, according to Credit Suisse.
To encourage refinancing, Obama administration officials and U.S. regulators are in talks with lenders about ways to revamp an existing White House refinancing initiative designed to help borrowers with little or no equity. The program is open to borrowers whose loans are backed by Fannie and Freddie, which guarantee about half of all outstanding home loans.
Not one actually looking for more government intervention in enhance homeownership. However, a program to lower rates might help some borrowers stay in the their home, which might slow down the number of foreclosures impacting the GSE's and their need for additional funds to remain "solvent".
The Federal Housing Finance Agency, which oversees Fannie and Freddie, is weighing a series of changes to the program, which has been snarled by a series of technical hurdles. Just 838,000 borrowers have refinanced, short of the hoped-for four million to five million. Just 63,000 of those borrowers have loans worth more than 105% of their home value.
A separate question is whether banks will be able to handle the volume of mortgage applications.
The answer to this question today is already "barely".
Banks recently have laid off mortgage employees in anticipation of lower loan volumes, while shifting others to the backlog of delinquent loans. The reduced ability to handle loan volumes means that banks have charged higher rates relative to their borrowing costs, muting the decline in rates.
Lenders, in many cases, are being too conservative in rehiring. Most have currently employees working beyond a normal work week. Until the situation improves, borrowers will be paying a small premium to refinance.
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