A new wave of mortgage refinancing and home ownership has swept across the US, but some borrowers may find themselves facing foreclosure at the end of the month.
That’s the case for more than half of borrowers, according to a survey of more than 5,000 borrowers by Fitch Ratings.
The survey found that just over two-thirds of borrowers who received refinancing loans in the first quarter of 2017 had to repay at least some of the amount borrowed, and half said they had already had their home repossessed.
About one-quarter of borrowers with loan modifications or new mortgages said they could not get a loan modification and one-fifth of borrowers said they were not able to get a mortgage modification, according the survey.
Fitch found that the percentage of borrowers reporting a default increase from 16 percent to 21 percent, and the percentage reporting at least one loan modification declined from 35 percent to 30 percent.
More:The average borrower defaulted on a loan in the quarter ended Dec. 31, a 3.9 percentage point increase from the same quarter last year.
The median loan modification defaulted was $6,000, an increase of $2,600 from the second quarter last week.
Fitches said it did not have data on refinancing borrowers.
The government’s largest lender, SBA, said it has seen no change in refinancing originations since the first half of 2017.
SBA said refinancing in the second half of last year fell 6.5 percent from the first.
“This is a reflection of continued positive trends in the residential real estate market and the underlying financial strength of the SBA portfolio,” SBA chief financial officer Robert Lusardi said in a statement.
“As we continue to see a solid and continuing recovery, refinancing remains an important strategy for helping homeowners stay in their homes while balancing their debt and finances.”
Bankrate.com/Home Loan Market The chart below shows the rate at which home loans are being refinanced.
As you can see, the refinancing rate in the third quarter was at 5.3 percent, the highest in six months.
SBB said the average refinancing loan was $4,000 for borrowers who had a loan modified, up from $3,500 in the same period last year, and up $500 from the quarter of last week, according and a data set compiled by FITCH.
The average modification was $2.5, up $400 from the fourth quarter last month.
Fannie Mae, the nation’s largest mortgage servicer, has reported that refinancing increased by nearly 10 percent in the fourth quarters of 2017 and the first six months of 2018.
SAA, meanwhile, said that it had seen no decline in refinanced originations in the quarters ended Dec, 31, 2017 and Jan. 1, 2018.
The Federal Reserve Bank of New York said in its survey that it is concerned about the increasing complexity of home loans, and that there is concern that home loans might become too complicated and subject to too many variables.
More than 60 percent of borrowers have a credit score that is below 620.
For those with higher credit scores, the number of payments is likely to increase.
FITCH said in the survey that its loan modification data “is incomplete and that refinanced loans are more likely to be paid in installments than in monthly payments.”
The median home loan modification payment is $1,000 per month, up 4 percent from last year and $400 above the median payment for all of 2017, according.
The SBB’s Lushardt said refinanced home loans “have a higher risk of default.”
Fitch said it does not include the origination fee on refinanced mortgages.
The index is a measure of overall loan performance based on the average loan value, which is calculated by dividing a borrower’s current income by the average value of their loan.
Fitts said it expects refinancing to grow significantly in the next year and that this may impact interest rates on loans for which borrowers are paying more.
“Refinancing is not a cure-all for all issues,” Fitch’s Lussardi said.
“The data suggests that refinancers can help reduce default rates, but that there may be significant downside risk for borrowers with low credit scores and for borrowers whose monthly payments exceed their payments on their current mortgages.”
More:For borrowers with a loan, Fitch also found that borrowers who receive refinancing assistance in the form of a down payment, or monthly payment, tend to have lower delinquencies.
SABB’s Luzardi said that this “may also explain why refinancing rates have risen and why borrowers with less favorable credit scores are having trouble getting refinanced.”
More on Fitch:The survey of 2,500 borrowers also found:About 60 percent reported having a credit rating that is at least 620, up 2 points from last quarter.
More people are applying for a loan with a