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Less refinancing, more profit

By Judy Martel · Bankrate.com
Wednesday, May 30, 2012
Posted: 6 pm ET

Fewer homeowners are qualified to refinance this year compared with the frenzy during the housing boom's relaxed lending environment, but even so, it's more profitable business for banks. Stricter borrowing standards mean that fewer homeowners qualify for a refinance, but what banks call the "gain on sale" for each mortgage averages $3,000, Guy Cecala from Inside Mortgage Finance told The Wall Street Journal.

Lower mortgage rates have pushed more homeowners to investigate refinancing. The Mortgage Bankers Association estimates refinancing activity this year will be $870 billion, a $470 billion increase over last summer's forecast.

However, 2013 looks quite different. The Mortgage Bankers Association predicts a 60 percent drop in refinancing, mostly due to a belief that mortgage rates will rise to 5 percent on average for a 30-year fixed-rate loan. This month, Bankrate has been reporting 30-year rates at less than 4 percent.

With banks having little incentive to staff up for a potential slowdown in activity next year, now is the time to take advantage of the low rates and consider refinancing if you can.

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