The biggest U.S. mortgage lenders, whose first-quarter earnings were buoyed by gains on home loan refinancings, are raking in more profits as record-low interest rates and government efforts prolong the boom.
Revised federal programs making it easier for homeowners to lock in lower rates helped push the Mortgage Bankers Association refinancing index to a three-year high last month.
That signals a windfall for banks including Wells Fargo that renewed about 5 million loans in 2011 amid the Federal Reserve's drive to keep borrowing costs near zero.
Wells Fargo is the nation's largest home lender.
Refinancings probably rose 4.2%, to $275 billion, in the quarter that ended last week, the bankers group forecast, three months after saying the boom was over. About 5.6 million loans will be refinanced this year, said Keith Gumbinger, vice president of HSH Associates, a mortgage research firm in Pompton Plains, N.J.
"This fits into the general narrative that we are not yet out of the market aberrations from 2008 and 2009," said Nancy Bush, an analyst and contributing editor at SNL Financial."
Government efforts are "pushing revenue" to the banks, she sais.
Wells Fargo, of San Francisco, posted $2.9 billion in mortgage banking income in the three months that ended March 31, the most since the final quarter of 2009, according to the bank's statements. JPMorgan Chase set a record for home loan production income amid gains from the federal Home Affordable Refinance Program.
While a boon for banks, the Obama administration's housing policies and Fed Chairman Ben S. Bernanke's cheap cash also are giving consumers the chance to save as much as $14 billion a year. The average borrower saves about $2,500 a year in a loan renewal, said Mark Zandi, chief economist at Moody's Analytics in West Chester, Pa.
The government last year eased standards for Harp, giving Fannie Mae and Freddie Mac borrowers an opportunity to refinance no matter how little equity they have in their homes. During a conference call with analysts in May, Wells Fargo's chief executive, John Stumpf, said the lender's origination volume has been helped by Harp.
"I suspect there will be continued volume there," Stumpf said.
A federal program that went into effect June 11 attempts to bolster refinancing of Federal Housing Administration-backed mortgages. The so-called Streamline program allows people with existing FHA mortgages to refinance without credit checks, home appraisals or minimum income requirements.
The government refinancing index more than doubled in the week that ended June 15.
While the measure dropped 21.5% for the period that ended June 29, it "continues to be at an elevated level," Morgan Stanley analyst Janaki Rao said a note Thursday.
