Should we worry about the volume of cash-out refinancing?
March 15, 2021
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In today’s HousingWire Daily episode, HousingWire HW+ Managing and Magazine Editor Brena Nath joins HousingWire Editor in Chief Sarah Wheeler to discuss the hottest topics coming across HousingWire’s news desk.
In this episode, Nath and Wheeler discuss HousingWire Lead Analyst Logan Mohtashami’s recent HW+ article which dives into the recent uptick in cash-out refinancing and examines whether or not this will lead to a cash-out loan crisis.
The pair also reviews last week’s biggest stories, and the topics the HousingWire editorial team will cover in the week ahead.
Mohtashami’s article is part of our HW+ premium membership community. When you go to sign up, use the code “hwpluspodcast100” to get $100 off your annual membership.
For some background on the interview, here’s a summary of the article:
I hear a lot of chatter about a boom in cash-out refinances, and the presumption seems to be that this is destined to wreak havoc on the housing market and the economy at some point. Cash-out loans have been growing over the past few years and it is also true that we have a recent history of excessive equity extraction factoring in a bust in housing. But there are several critical reasons why the recent uptick in cash-out refinancing is nothing like the cash-out boom of the early to mid-2000s.
First, the refinance boom’s main driver in the 2000s was unhealthy because of the marketplace’s speculative unhealthy lending standards. Home prices were growing at an unsustainable level from 2002-2005, leading to some excess risk-taking on inadequate loan debt structures.
In the 2020 market, on the other hand, refinances were not driven just by an increase in equity but lower mortgage rates. Cash-out loan borrowers who increased their loan balances could get a more favorable rate than in previous years. Although mortgage refinance activity was the highest in 2020 than it has been since 2003, the reasons for refinancing and the quality of the equity loans are much different than they were in the 2000s.
HousingWire Daily examines the most compelling articles reported from the HousingWire newsroom. Each afternoon, we provide our listeners with a deeper look into the stories coming across our newsroom that are helping Move Markets Forward. Hosted by the HW team and produced by Alcynna Lloyd and Victoria Wickham.
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