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It looks as though home refinancing may be down, but not yet out. Although overall home refinancing has declined, lenders are beginning to see a slight resurgence in requests for cash out refinances.
This is due to the increase in home equity, the continued low-interest rates and an increase in consumer debt.
Current homeowners see an opportunity to trade high-interest rate student loans and credit card debts for lower mortgage rates by tapping some of the cash from the equity built in their home.
This is cause for concern at the Center for Responsible Lending. The fear is that consumers will once again get in over their head and put their home in jeopardy.
As we’ve learned, the key to any lending is quality; whether it is for a home purchase, a refinance or an auto loan. Lenders have learned that loan quality and compliance are as important as production and pricing. The loans made today will determine the state of the industry and the economy of tomorrow. That must be done right!
Poor loan quality will lead once again to poor loan performance. We know where that gets us and it ain’t a good place. If lenders continue to originate loans of the current quality there shouldn’t be problems.
Loans originated since the crash have been consistently of good quality and lenders have learned to ensure they are in compliance with the laws.
So opportunity waits in the form of cash out refinances and equity loans. When taking advantage, lenders need to stay the course, follow the rules and make sure their borrowers fully qualify to maintain the loan.
Keep all the proper checks and balances in place and consistently review their loans, both pre and post-closing, to ensure quality and compliance. There are no shortcuts to loan quality.
I think we’ve learned our lesson. Let’s go make some loans.
