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No room for a boom, Mortgage lenders aren't quite over the last rush to refinance

If you blinked, you missed the refi boom.

The rush to refinance home mortgages was two weeks ago, when investors fleeing collapsing stocks hit bonds hard, pushing prices up and yields down. Mortgage rates followed, as usual, especially the 10-year Treasury.

The first week of March, the 30-year fixed-rate mortgage averaged 3.29%, the lowest rate in the history of Freddie Mac's Primary Mortgage Market Survey, which started in 1971.

What happened Monday was more of a flush.

The Federal Reserve's emergency interest rate cut Sunday afternoon flushed more would-be refinancers like so many quail. They flew into loan rates still at historic lows, but not cratered, in a mortgage market indifferent to the Fed rate cut, but being so tossed by the global financial storm that no one knows what to expect next.

The biggest force was the stock market, swooning again, slinging investors to bonds, lowering yields, enticing mortgage rates to follow them down — if they will. The financial crisis born of the new coronavirus created a disconnect between mortgage rates and Treasury yields.

Mortgage rates on Monday were above 4%.

The other big news out of the Fed — its intention to spend $700 billion buying Treasurys and mortgage-backed securities, to keep credit flowing — will bring the correlation between mortgage rates and Treasury bills back together, according to experts, and could help keep mortgage rates lower over time.

The Fed's investment in bonds, called quantitative easing, won't trigger another refi boom.

"It has been a remarkable two weeks. The refi boom basically lasted from March 2 to March 6. Rates dropped like a rock on that Monday, but by middle of the day on March 9, rates were back up," said Scott Senner, senior loan officer with Interlinc Mortgage Services LLC in Edmond. "The increase, in most observers' opinion, was due to a capacity issue.

"So many refinance applications, coming in so fast, combined with the uncertainty in the market, caused most mortgage investors to 'throttle' their pipelines by raising pricing. It is anyone's guess as to what happens this week, but most experts expect rates to come down gradually over the next couple of weeks as pipelines get smoothed out and, hopefully, the market returns to some sense of normalcy."

Senner added, "For me personally, that week of March 2 was the busiest week of my career, so having rates go up last week was sort of a blessing in disguise. It gave my team and I the chance to get caught up on all the new files. (People are asking) what the Fed rate cut means to mortgage rates. The answer is 'nothing.'"

The stock market dived Monday, so another round of refis is likely if the industry catches up.

"When the rate hit record lows around March 6 there was a 500% increase in applications across the country. This put a major stress on the markets and retail lenders' infrastructures. Yes, I believe the lack of capacity was one of the factors rates ticked up after that," said Steve Sivigliano, branch manager for Goldwater Bank in Edmond.

"Since the government is rolling out some quantitative easing by purchasing MBSs (mortgage-backed securities), I don’t know how this is going to play out. If rates stay down, then yes, we will see a refi boom and lenders will likely be delayed when processing and closing a loan."

Richard Mize

Real estate editor Richard Mize has edited The Oklahoman's weekly residential real estate section and covered housing, commercial real estate, construction, development, finance and related business since 1999. From 1989 to 1999, he worked... Read more ›

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