Surge in Refinancing.

Refinancing activity is on the move again due for the most part to continuing low rates and stimulus package provisions that increased loan limits for FHA insured mortgages and Fannie/Freddie policy changes. A mortgage production report notes a 48% increase in refinancing during the past month. The great beneficiaries are high end loans that can now be bought by Fannie and Freddie. The increase in liquidity and confidence in the secondary market due to the GSEs presence will undoubtedly ease some pressure.

One aspect of this change however does not mention the increase in costs associated with refinancing. In addition to requiring high credit scores, fees are assessed to those new high limit loans. For instance most lenders charge 2.5% for increased FHA insured mortgages that exceed the old limits.

Conventional and FHA insured loans are subject to fees based on the borrower's credit scores. Those fees can be as high as 3% of the loan amount. In general, it is fair to say that for a lot of borrowers having the possibility to refinance outweighs the costs specially if it results in lower payments and/or fixed rates. Saving one's home from foreclosure is definitely a better option for both the borrower and the lender.
Construction slowdown for 24 consecutive months happens to be a good sign in that it reduces the overall inventory and may help stabilize the market. The decline in property values still present a great challenge for may borrowers who would consider refinancing.
To summarize the situation, refinancing is up, rates are still low and fees are increasing while the values are still challenged.