By Matt Joy, Princeton Mortgage Wholesale
A few months ago, we chatted about the refi market and how homeowners are sitting on mounds of equity thanks to the rising home values. Well… Freddie Mac is reporting that the equity train will continue to build steam deep into 2018. According to Black Knight’s data and analytics research homeowners with mortgages are sitting on $5.5 trillion (that’s not a typo… I said trillion with a T) in available equity to borrower against. Okay… so here is the million or maybe trillion-dollar question now… when will borrowers begin taking advantage of the equity and start refinancing again?
Obviously, there is an education process that needs to take place and we as mortgage professionals should be encouraging borrowers to review their entire financial portfolio to determine whether they would truly benefit from borrowing against the equity they’ve built in their home. That equity could be used for paying off student loan debt, a car loan, some credit card debt before summer or maybe it could be used as a reinvestment back into the home… there are repairs to be made and a kitchen to redesign. It’s a tough sale though… we’re encouraging more debt, but hey isn’t that what capitalism and the modern-day housing market all about? Clearing debt to take on more? There is some sarcasm in my tone, but the reality of the situation is that we as Americans love to spend money… so let’s start spending!!
Speaking of frivolous spending lets talk about the government and our pals Fannie Mae and Freddie Mac… it looks like our life blood needs some help monetarily and will be looking for a $4 billion draw from the U.S Treasury to maintain a positive net worth. Now, let’s not get all 2008 and assume this is some sort of “bailout” ... because according to some it’s quite the opposite. There was an excellent op-ed written in National Mortgage News that dives deeper into agencies request for cash. It examines the government “takeover” of the agencies in 2008 and how the government used conservatorship to essentially extort the housing giants into repaying billions over what they were actually “bailed” out for (sorry I’m quote happy today). The article says that Fannie and Freddie have paid the government over $100 billion more than the $187 billion they received as part of the “bailout”. I think we’re safe to say that the treasury can go out on a limb on float the agencies a cool $4 billion to help them get back on their feet… I mean after all it is their money they’re being paid back with… right? This all seems to me like we’re getting one step closer to privatizing the agencies again and hopefully creating a more competitive secondary market place… maybe one that eases the pricing adjustment on a cash-out refi… making it more advantageous to tap into that equity?
I guess we’ll have to wait and see.
Talk to you soon!
Photo by Tim Trad on Unsplash
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.