patrick.net

Surge in Home Equity Loans Coming?

With mortgage refinancing activity down 30% between May and September, will homeowners turn to home equity lines for cash?

That is a possibility suggested by the LPS Mortgage Monitor. Via email ...
"We have seen prepayments decline by more than 30 percent since May, when mortgage interest rates began climbing approximately 100 basis points to where we are today," LPS Senior Vice President Herb Blecher said. "As a result, the percentage of borrowers currently in loans with interest rates high enough for refinancing to make fiscal sense has decreased significantly. Over half of borrowers are now 'out of the money' with respect to refinancing. In December 2012, the population of potentially refinance-eligible borrowers stood at roughly 10 million. However, refinance activity during that time, along with rising interest rates, have shrunk that pool to just 5.7 million borrowers as of August.

"While higher interest rates may certainly have the effect of tamping down refinance activity, they may actually wind up contributing to a new appetite for home equity loans among homeowners," Blecher continued. "After bottoming out at the beginning of 2012, home prices are now at their highest levels since 2009, and borrowers who bought or refinanced within the last few years are quite likely to have accumulated additional equity in their homes. Based upon LPS' analysis of historical borrowing patterns and home value trends, it is possible that we could see an increase in second-lien borrowing among those who have locked in their first mortgages at very low rates and who wish to tap their equity without refinancing into a higher rate."

Refinancing and Home Equity Activity

Charts from the September LPS Mortgage Monitor

Prepayments Down 30%

50% Ineligible for Refinancing

Loans with Refinancible Characteristics

Mortgages with Second Liens

Historical Trends in HEs

Surge in HE Loans Coming?

A surge in home equity loans depends on three things

Home prices continue to rise
Willingness of borrowers to take out loans
Willingness of lenders to offer loans at low rates

None of the above is a given.

If home prices stagnate or decline, no surge in home equity loans will follow.

Even "if" home prices continue to rise, projections as to what "may" happen if recent vintages follow the 2003 pattern are invalid because attitudes towards borrowing and lending are not the same now as in 2003.

Once attitudes on debt and housing reach a peak and reverse, it takes decades before they peak again.

If home prices continue to rise (a very big if), there will be some increase in home equity loans, but not at a pace we have seen before.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Goldmoney: The best way to buy gold and silver

Surge in Home Equity Loans Coming?

Posted by Michael Shedlock at 12:06 PM

Disclaimer:The content on this site is provided as general information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

11 Comments
Newer Post Older Post Home
Subscribe to:
ABOUT MIKE SHEDLOCK

Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Continue reading...

Goldmoney: The best way to buy gold and silver

Top Financial Blog Citations

New York Times: NYT 10th Annual Year in Ideas - #1 Idea of the Year 'Do-It-Yourself Macroeconomics'

Time Magazine: Best 25 Financial Blogs

Bloomberg: Financial Blogs: The Best of the Bunch

CNBC: Best Alternative Financial Websites

Strategist News: Best Business Blogs 2011

Android app on Google Play

Mish Audio Video

2012-11-03: Capital Account
"Jobs, Real Wages, Income Distribution, Fiscal Stimulus"

2012-10-10: Capital Account
"IMF Downgrades, Unemployment, Participation Rate, Conspiracies; What is the Best Way to Measure Unemployment?"

2012-09-19: Capital Account
"QE to Infinity and Beyond"

2012-07-24: Capital Account
"Social Media Panic in Italy, Soaring Yields in Spain, and the Upcoming 20th Euro Summit, Bound to be Another Failure"

2012-07-11: Capital Account
"Time for Krugman to Leave Ivory Tower for Real World"

2012-04-15: Max Keiser
European Merry-Go-Round, Rising Yields in Spain, Obamacare, the US Dollar, Student Loans, Gold

2012-03-06: Capital Account
Greek Exit, Stock Valuations, War in Iran, Where to Put Your Money, Faber's Formula for Safety

2012-01-28: Capital Account
Snow stories from Davos and "muddle-through" economics with Mish

2012-01-20: Capital Account
Discussion of Money Supply, Inflation, the Fed, SOPA; GOP Chairman Shelves Stop Online Piracy Act - A Triumph for Whom?

2011-12-20: Capital Account
Mish on Malfunctioning Bureaucrats, Gold's Recent Decline and Chinese Chicken Feet

2011-12-29: Max Keiser
Mish 2012 Predictions; 2011 Year in Review with Max Keiser

2011-11-18: Max Keiser
Rise of Technocrats, Fraudulent Conveyance, MF Global, the Culture of Greed, Christina Romer, and the US Dollar

2011-05-11: Wall Street Shuffle on Jobs, Silver, Oil
CNN Radio KFXR 1190 AM, Dallas-Fort Worth

2011-04-23: Syndicated Interview on Canadian Radio - My Segment Starts 29:31
This Week in Money Interview

2011-03-29 - Sound Money Interview
"Sound Money Interview on 91.5fm WNYE New York

2011-02-11 - Deflation or Inflation?
"Interview with the Freedom News Hour

2011-01-06 - Bulls and Bears Themes for 2011
"Frisby's Bulls and Bears 2011 Predictions from James Turk, Bob Hoye, Mish, Others

2010-03-12 - Mish with Marc Faber
"Inflation or Deflation?" Debate: Mish vs. Dr. Doom

2010-02-12 Max Keiser
Spotlight on China, Japan, Jobs, Pensions, Part 1

Spotlight on China, Japan, Jobs, Pensions, Part 2

2009-12-09 Tech Ticker
"Bank Lending, Jobs, The Great Retrace

2009-10-30 King World News
Mish and Eric King discuss Gold, the Stock Market, the US Dollar, Sideline Cash, China, and US real estate

2009-05-15: My Speech at Google
Thoughts on Blogging and the Economy - Speech at Google

Elliott Wave International
A Big Reason Why 2013 Stock Prices are in the Stratosphere
The 3 Phases of a Trader's Education
Deflation Will Take the Majority by Surprise
The Rundown on Runaway Inflation in One Chart
Bonds No Safe Haven from Stock Market Risk
3 Dangerous Myths About Rising Bond Yields
Announcing Trader Education Week -- A FREE trading event that will teach you how to spot trading opportunities in your charts. Spend October 2-9 getting free trading lessons that you can apply to your trading immediately -- from one of the world's foremost market technicians, Jeffrey Kennedy. Register now for your FREE week of trading lessons and get immediate access to 4 introductory resources.

BLOG ARCHIVE

CALCULATED RISK

Tuesday: Small Business Optimism, DELAYED: Trade Deficit, Job Openings
Lawler: Fannie Mae on Government Shutdown and Government Verifications
CBO Report on Fiscal 2013 Deficit
Framing Lumber Prices increased recently
LPS: Mortgage Delinquencies Decline in August, Prepayment Activity Declines Sharply
ACTING MAN AUSTRIAN ECONOMICS DISCUSSION

The TEPCO Zombie Kabuki Show
Cameron’s EU Plans Challenged from Within
More Drugs … More Drones … More Credit-Pushing Drivel
Gold & Gold Stocks Update
Bitcoin and the Silk Road Bust
DSHORT.COM - FINANCIAL LIFE CYCLE PLANNING

Weekly Gasoline Update: Down Another Six Cents
S&P 500 Snapshot: Shutdown Day Seven, Market Selling Remains Controlled
The S&P 500, Dow and Nasdaq Since Their 2000 Highs
Nikkei versus the Government Shutdown: Which Could Have the Greater US Market Impact?
Gauging Investor Sentiment with Twitter: New Update
CHRISMARTENSON.COM NEWS FEED

Lester Brown: The Sobering Facts on Global Resource Scarcity
Live Blogging the Casey Summit 2013 Conference (Day 2)
Live Blogging the Casey Summit 2013 Conference (Day 1)
The (Needed) Revolution Emerging in Education
Jim Rickards: We're Witnessing One of the Greatest Failed Experiments in Economic History
CHINA FINANCIAL MARKETS

Revisiting my 2011 predictions
Rebalancing and long term growth
The urbanization fallacy
The changing debate over China’s economy
Rebuilding the blog….
OFTWOMINDS

It's Definitive: We've Reached Peak Jobs
The (Needed) Revolution Emerging in Higher Education
Five Goals for the Era Ahead
FT ALPHAVILLE

US default stripshow
Markets Live: Tuesday, 8th October, 2013
The (early) Lunch Wrap
Walking dead update
Oh the sunny uplands of Italian banking turnarounds. That’ll be €2.5bn please
STEVE KEEN'S DEBTWATCH

Crash Course in Disequilibrium Economics
Low-grade journal rankings are failing economics
Why this is a bad time to win an election
Famous Models of Chaos in Minsky
The getting of wisdom part two
OIL PRICE

Oil-Rich Kurds Squeezed in Iraq
EIA Predicts U.S to be 2013’s Largest Petroleum Producer
US Shale Dealt a Blow as Oil Majors Struggle to Turn a Profit
Tensions Threaten Long Standing Natural Gas Partnership between EU and Russia
Storing Carbon Dioxide in Fracked Shale Formations

George R. Evans
The 100% Global Portfolio
OppenheimerFunds
Investing Megatrends: Mass Affluence

Copyright 2009 Mike Shedlock. All Rights Reserved.
StatCounter - Free Web Tracker and Counter View My Stats
Home About Contact Sitka Pacific

Read more at http://globaleconomicanalysis.blogspot.com/2013/10/surge-in-home-equity-loans-coming.html#0BfbOJRlU4hlPsrU.99

#housing