[FINANCES] Anthony Hsieh (LendingTree) on Mortgage Refis
- Insider Q&A on mortgage refis
With mortgage rates low but home sales sluggish, what's a lender to
do? Apparently, handle a fresh wave of refinance business. To see
what's up, we checked in with an old O.C. banker and online lending
pioneer, Anthony Hsieh, now president of LendingTree ...
Q: What's driving the refi market, other than low rates? How much is
it folks moving to avoid major payment shock when teaser rates go
A: Low rates and adjusting (adjustable rate mortgages) ARMs have
created what we are calling a "mini-refi boom." Last week the MBA
recorded a year-over-year jump in refi activity of 59.8 percent.
That's a lot of people taking advantage of some of lowest rates we've
seen all year. No more dragging their feet it's time to get out of
that risky ARM.
Q: What kind of loans are people using to refi? In the past, lots of
folks were just restarting teaser-rate ARMs vs. locking in fixed. ...
Has that changed?
A: With long-term and short-term rates running neck in neck, we are
seeing activity with both. Some are swapping an ARM for an ARM, but
also there are those who are interested in locking in to a fixed
product. We are, however, seeing that due to payment shock on a fixed
rate, these customers are looking at three- to five-year fixed
interest-only loans as an alternative.
Q: Are cash outs still big? We know there's still lots of equity
A: Cash out remains king. Borrowers will take the opportunity to
leverage equity and tax deductibility through their home. Right now
it is just a matter of whether or not they can afford the payment and
if they have enough equity to pull cash out.
Q: Any new loans out there that's catching people's fancy?
A: Right now we're not seeing anything new. Borrowers are still
staying loyal to the old standbys.
Q: What's your outlook for rates in '07?
A: We look for interest rates to stay relatively flat for the first
half of 2007, with the possibility of rate decreases by the Federal
Reserve in the second half.
Q: And what about foreclosures? How bad may it get?
A: Rising rates, resetting ARMs and slowing home appreciation have
created a foreclosure formula. To keep it in perspective, the
foreclosure activity we are seeing is a jump from what has been
historically low in recent years. Subprime borrowers are at a greater
risk of facing foreclosure due to the reasons listed above. What's
important is preventing any more. Borrowers need to take a healthy
look at their finances and fully understand what they can afford
before purchasing a home.