QE3 Lowering Rates, But Refi Incentive Still Limited

The Federal Reserve’s third quantitative easing program has made more progress lowering rates than some expected, but it is not at a point where it will spur refinancing notably, a mortgage strategist told listeners to a Credit Suisse teleconference Tuesday morning.

Mortgage rates have gone down almost 18 basis points or so since the Fed started its program in Credit Suisse’s survey, but the population of overall eligible borrowers exposed to refinancing incentive as a result is not going to increase dramatically, Mahesh Swaminathan, CS head of residential mortgage strategy, said.

He also was conservative in estimating the extent to which purchases could increase in the new future due to the Federal Housing Finance Agency’s new outline for a “bright line” test that limits repurchase risk after 36 months of on-time borrower payments.

Swaminathan said lender feedback suggests that it will take some time for the industry to achieve the comfort level with the change needed for the credit box to loosen in any significant way.