How Long Can This Refi Boom Last?

*How Long Can This Refi Boom Last?*
**By Tony Garritano**

***Lenders have enjoyed the benefits of historic low rates all this year. But what happens next year? Most predict that the refi rate will slow, but will still be over 50% of originations done next year. According to the Origination Insight Report for October 2012 put out by Ellie Mae, refis are rising. To get a meaningful view of lender “pull-through,” Ellie Mae reviewed a sampling of loan applications initiated 90 days prior (i.e., the July applications) to calculate an overall closing rate of 54.5% in October 2012, compared to 50.5% in September 2012.

****“In October, the closing rate for refinances was 51.3%, up from 45.3% in September 2012, and the first time since we began our tracking, in August 2011, that the pull-through rate for refinances topped 50%,” said Jonathan Corr, chief operating officer of Ellie Mae. “The 30-year note rate on closed loans also hit a new low last month for our report, dropping to 3.671% in October 2012 from 3.773% in September 2012.

****The report draws its data and insights from a robust sampling of applications—more than 20% of all originations in the United States. The Origination Insight Report focuses on loans that closed or were denied in a specific month and compares their characteristics to similar loans that closed or were denied three and six months earlier. The closing rate is calculated on a 90-day cycle rather than on a monthly basis because most loan applications typically take one and a half to two months from application to closing.

****“The combination of record low interest rates and higher refinance closing rates pushed out the average time to close on a month-over-month basis from 53 days to 57 days for refinances,” Corr noted. We’ll see if this trend is lasting.