Commercial Real Estate Finance

Want to refinance your home to take care of historically low interest rates?  Hold your horses.

The WSJ reports that:

Around 37% of all borrowers with 30-year conforming fixed-rate mortgages - who collectively hold about $1.2 trillion of home loans - have mortgage rates of 6% or higher, according to investment bank Credit Suisse. Many could reduce their rates by a full percentage point if they refinanced at current rates, about 5%. More than half could lower their rates nearly three-quarters of a percentage point, according to Credit Suisse.

What is amazing about the current economic environment is that homeowners cannot refinance to take advantage of historically low interest rates because of depressed home values.  Home prices have fallen, many homeowners do not meet the LTV requirements necessary to refinance.

Never before has there been low interest rates, and low refinancing.  If securitization were still around this would certainly screw up the models used to calculate expected prepayment rates.

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