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Fannie Mae and Freddie Mac are refinancing fewer mortgages than at any point since the crisis

Where have all the refis gone?

Recently released data from the Federal Reserve Bank of New York’s Center for Microeconomic Data revealed that the first quarter of this year was the mortgage business’ worst quarter in more than four years, but a deeper dive into the data shows that on the refinance side of things, it may have been the worst quarter since the financial crisis.

The Fed report, which looks at mortgage originations as appearances of new mortgage balances on consumer credit reports and includes refinances, showed that the first quarter had the lowest dollar amount of mortgage originations in any quarter since the third quarter of 2014.

That news came as a bit of shock, especially considering that mortgage interest rates fell throughout the first quarter, leading some to predict that there may be a rise in refinances.

But as foretold by the Fed data, it appears the exact opposite happened, at least on mortgages backed by Fannie Mae and Freddie Mac.

In fact, according to a new report from the Federal Housing Finance Agency, Fannie and Freddie refinanced fewer mortgages in the first quarter than they have in any quarter since at least 2008.

According to the FHFA report, Fannie and Freddie refinanced a total of 234,716 mortgages in the first quarter of this year.

And a review of 10 years worth of data from the FHFA shows that that is the fewest number of refinances completed by the government-sponsored enterprises in any quarter since the financial crisis.

The number of refinances completed by the GSEs has decreased fairly steadily since 2016, with minor jumps during several quarters. But overall, the number of refis from the GSEs has declined for the last several years.

And that trend led to the lowest level of refis since the crisis.

According to the FHFA report, Fannie and Freddie refinanced 245,619 mortgages in the fourth quarter, which was the previous low over the last 10+ years.

In the first quarter of 2018, the GSEs refinanced 356,001 mortgages, more than 120,000 refinances above the first quarter of this year.

Two years ago, the GSEs refinanced twice as many mortgages (510,075 in 2017) in the first quarter as they did in 2019.

For a real shock, consider what happened in the first quarter of 2013 when the GSEs refinanced 1,395,383 mortgages in a three-month period.

That spike coincided with historically low interest rates. Back in November 2012, interest rates fell to approximately 3.35% and stayed near that level for several months, leading to the massive total of refinances in the first quarter of 2013.

And that’s really the bottom line here. It’s possible that there just aren’t that many refinance opportunities left out there. Even with interest rates recently falling to nearly 4%, there just isn’t that much financial incentive for many borrowers to refinance if they haven’t already, or if they got a mortgage in the last few years.

Although it should be noted that earlier this year when mortgage rates saw largest single-week decline in 10 years, a report from Black Knight suggested that 4.9 million homeowners with a mortgage could reduce their interest rate by at least 0.75% by refinancing.

Now, it’s possible that there could still be a refi surge. In fact, the FHFA report notes that refis actually rose in March, just as mortgage rates were experiencing that historic drop.

And the mortgage industry could really use a refi boom, considering, as Black Knight noted, that 2018 saw the lowest refi volume since 2000.

But as you can see in the graph below, that increase in March was small, in relative terms.

FHFA report on refi activity May 2019

(Click to enlarge. Image courtesy of the FHFA)

Only time will tell if that increase was a harbinger of a refi explosion or a mere mirage.

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