Are there any Refinances left?

Written By: Glenn Michaels, Op-Ed Writer

Over the last few years while rates were historically low, virtually everyone that could refinance their mortgage, did refinance. Now some of the major center banks have announced layoffs due to minimal refinance activity.

Mortgage loan originators that concentrated on the refinance market instead of the purchase market are now hurting and looking for business. In addition mortgage loan originators that concentrated on the reverse mortgage market are also hurting due to the many recent changes to that program.

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The borrowers who are having difficulty refinancing their mortgages are those whose mortgage are not owned by Fannie Mae, Freddie Mac or insured or guaranteed by FHA or VA. Borrowers that are underwater on their mortgage cannot refinance easily unless their mortgage is owned by the above captioned agencies or insured or guaranteed by FHA or VA.

If a borrower’s mortgage is owned by Fannie Mae or Freddie Mac these borrowers if they have paid their mortgage on time for the most recent twelve (12) can refinance using the Home Affordable Refinance Program (HARP). The value of the property is not as important and underwater mortgages can refinanced. The Debt To Income (DTI) requirements are also relaxed and more borrowers can qualify under the HARP program.

Borrowers that have a FHA or VA mortgage can obtain a streamlined mortgage with or without an appraisal report. More of these loans are being refinanced without an appraisal. Therefor if a borrower is underwater but has made their mortgage payment on time for the most recent twelve (12) months this refinance is almost automatic as long as there is a “net tangible benefit” to the borrower. The “net tangible benefit” means that a borrower is saving five (5) percent or more in dollars on his PITI payments when the borrower refinances from a fixed rate mortgage to another fixed rate mortgage or the borrower is refinancing from an ARM to a fixed rate mortgage.

The remaining borrowers that cannot refinance are a big group. President Obama had requested that the US Congress pass the HARP 3 legislation. However, the Congress of the United States elected not to pass this legislation.

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Now there is some hope for many of these borrowers that could not refinance. Their home values are beginning to increase. The increase is not universal or the same all over the United States. One area that is not growing in value is areas that were impacted by Super Storm Sandy. Many of these geographic areas the values have declined after the storm and are slowly increasing in value or not at all.

I believe many of the money center banks have jumped the gun by laying off or announcing layoffs due to reduced refinancing. Every holiday season there is reduced mortgage transaction as borrowers are thinking about their holiday purchases and/or holiday vacations.

As the values increase around the United States and as soon as the holiday season is past us the refinance market should pick up again. If the Congress of the United States should pass HARP 3 mortgage originators will be busy again.

About The Author

Glenn Michaels - As an NAMP® Opinion Editorial Contributor, Glenn Michaels is a mortgage underwriting instructor for CampusUnderwriter ( As a BBA & FHA DE Underwriter, Glenn is a Pace University graduate who also graduated from New York University’s School of Mortgage Finance. Glenn has conducted numerous training classes and has worked in the mortgage banking industry for 38 years. 

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