Mortgage Refi Surge from Global Upheaval No Sure Thing

The financial turmoil in Greece and other debt-laden European nations could trigger a rebound of mortgage refinance activity in the U.S., or not. Upheaval in the global markets, such as last week's dramatic sell-offs, has historically prompted a "flight to quality"-investor purchases of Treasury bonds. Surging demand for these safe havens for capital can push yields-and the mortgage rates that move in lockstep-down. This in turn has often sparked interest in refinancing, and some lenders say they are already getting more calls from borrowers, which typically happens when mortgage rates fall below 5%. But many lenders also say they need to see a little more downward momentum on rates before an increase in refinancing is likely to stick. Rates would have to drop another quarter-point or more for refinancing to make sense to the large group of borrowers who already were part of a flurry of refinance activity last year. Borrowers would also have to overcome tighter underwriting and appraisal guidelines. And many borrowers still have little or no equity in their homes, making them ineligible to refinance. "A large part of the population that could refinance likely has," said Mark Freedle, chief executive of NetMore America Inc., Walla Walla, Wash. When the stock market fell by nearly 1,000 points last Thursday the yield on the 10-year declined to almost 3.3% before rebounding somewhat. On Monday the 10-year was trading at 3.56%. Because the average mortgage is paid off within 10 years, the 10-year Treasury serves as a bellwether to where mortgage rates might be headed.