Banks are pulling big profits off refinance boom

Miami /
Jun.June 08, 2012 03:45 PM

Borrowers who save thousands on their home loans after loan modifications aren’t the only ones profiting heavily off the refinance boom. According to CNBC, banks are cashing in, too. Refinances, which now comprise 78 percent of residential mortgage activity, bring benefits to the bank in the form of new fees. Record-low interest rates have spurred millions nationwide to apply for modifications.

“Mortgage origination profitability is off the charts,” Paul Miller, head of financial research at the investment bank FBR, told CNBC. “Refis are surging, and many are loans that just refinanced 6-12 months ago.”

While the banks do forfeit yields when they refinance loans, many have made deals that essentially hedge the risk of falling revenue from decreasing interest rates.

Part of the surge going into the refinance market finds its strength from the government’s changes to the Home Affordable Refinance Program, which happened earlier this year. HARP lets borrowers with Fannie and Freddie loans to refinance underwater loans, and the changes dropped any limit to the amount of negative equity a borrower has in their home. CNBC said that HARP volumes have doubled to 180,000 in the first quarter of 2012 from the fourth quarter of 2011, which CNBC said will also help big bank servicers. [CNBC]


Related Articles

arrow_forward_ios
From left: Property Markets Group's Ryan Shear, Kevin Maloney and Dan Kaplan with Elser Hotel & Residences
PMG, Greybrook score $235M refi of downtown Miami project
PMG, Greybrook score $235M refi of downtown Miami project
Ari Pearl completes luxury apartment tower in Hallandale Beach, scores $150M refi
Ari Pearl completes luxury apartment tower in Hallandale Beach, scores $150M refi
Ari Pearl completes luxury apartment tower in Hallandale Beach, scores $150M refi
Melo nabs $248M refi for downtown Miami apartment towers
Melo nabs $248M refi for downtown Miami apartment towers
Melo nabs $248M refi for downtown Miami apartment towers
Terranova scores $55M refi of Miracle Mile portfolio in Coral Gables
Terranova scores $55M refi of Miracle Mile portfolio in Coral Gables
Terranova scores $55M refi of Miracle Mile portfolio in Coral Gables
Qatari owner of St. Regis Bal Harbour pays off Reuben Brothers with $188M refi
Qatari owner of St. Regis Bal Harbour to pay off Reuben Brothers with $188M refi
Qatari owner of St. Regis Bal Harbour to pay off Reuben Brothers with $188M refi
Abu Dhabi sovereign wealth fund scores $180M refi of Miami Beach Edition hotel
Abu Dhabi sovereign wealth fund scores $180M refi of Miami Beach Edition hotel
Abu Dhabi sovereign wealth fund scores $180M refi of Miami Beach Edition hotel
David Grutman and Pharrell’s Goodtime Hotel in South Beach scores $164M refi
David Grutman and Pharrell’s Goodtime Hotel in South Beach scores $164M refi
David Grutman and Pharrell’s Goodtime Hotel in South Beach scores $164M refi
Dr. Jose Luis Ferreira de Melo, Carlos Ferreira de Melo and Martin Ferreira de Melo of the Melo Group. (Melo Group, Miami Plaza)
Melo Group scores $99M refi for apartment tower north of downtown Miami
Melo Group scores $99M refi for apartment tower north of downtown Miami
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...