The refinance mortgage market's unexpected resilience in 2015 has come as the result of a number of well-timed factors coalescing to create a welcomed surprise to lenders.
Traditional industry wisdom is for lenders to not over-rely on refinancing to support volume. While that continues to hold true, refis this year have had more life than expected.
The combination of still-low interest rates, rising home prices and government housing initiatives all had a hand in bolstering refinance originations, not to mention throwing industry forecasts for a loop.
For example, a year ago the Mortgage Bankers Association projected the refinance share of first quarter 2015 originations would be 38%. But refis ended up accounting for 53% of volume. Now, the MBA is expecting a 42% refinance share for all of 2015, up from its previous estimate of 35%.
"The primary influence is the rate drop. A secondary factor is that from 2011 to 2013, we had very low rates in the conforming sector but credit for jumbo borrowers was very tight. Now we're not quite as low as we were in 2013, but jumbo credit availability has expanded," said MBA chief economist Michael Fratantoni.
Lower-than-expected rates and concerns about when they might rise have been key drivers as they traditionally are, but there's more to it than that. Rates have been relatively low for a long time and burnout has long been anticipated.
A stronger housing market is another contributor.
"While it's clear that historically low interest rates have played a role in the pace of mortgage refinancing, rising home valuations, which have added to the pool of eligible borrowers in the government's Making Homes Affordable program, and a brisk national housing market, have been key drivers in the resilience of the sector," said Terry Moore, senior managing director at Accenture Credit Services.
Consumer confusion has plagued the Home Affordable Refinance Program and deterred some borrowers from taking advantage of the program, said Doug Duncan, senior vice president and chief economist at Fannie Mae. He added the government-sponsored enterprises have worked to clarify information for consumers.
"There were several misconceptions, like you have to bring a bunch of money to the table. Actually you don't," said Duncan. "The structure can be done so you don't have to bring any cash to the table," he said.
The reduction in the Federal Housing Administration's upfront premium also has bolstered refinancing. This "has led to a significant churning in the government space," said Duncan.
Another reason refinancing has continued to have legs is that some people are slow to respond to rate drops, ensuring demand continues.
"It's surprising the number of people who, if you look at their mortgage, they're in the money, but they don't act," said Duncan.
"There are some good reasons why they don't act," he added. "If you've paid 20 years on a 30-year mortgage, for example, you're paying mostly principal at that point and the refinance doesn't really save you much."
At the same time, it's not always a question of finances.
"People don't constantly just optimize their finances, they optimize their life, which involves a lot of other things other than constantly refinancing their mortgage," he said.