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AAA  Sep. 21, 2013
Refi repercussions
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Rock-bottom rates have helped lenders generate huge revenue from mortgage refinancing.

But as interest rates have risen this summer, homeowner demand for "refis" has declined.

Mortgage rates have climbed more than a full percentage point since May, when Fed Chairman Ben Bernanke first indicated the Fed could slow its $85 billion a month in bond buying. The program is aimed at lowering borrowing costs.

Many economists had expected the Fed would decide this week to scale back the bond purchases, but the central bank voted on Wednesday to continue the program at current levels.

Barring a sharp retreat in interest rates, refinancing demand will likely keep slowing down. Many homeowners who purchased at lower rates won't have an incentive to refinance.

Refinance volume totaled $673 billion in the first six months of this year and is projected to tumble 56 percent to $294 billion in the second half of 2013, according to data from the Mortgage Bankers Association.

Lenders that derive income primarily from making "refi" loans and selling them to mortgage buyers, like Fannie Mae, are most at risk of losing out, says Sterne Agee analyst Matthew Kelley. Among them: Bank of America, the PNC Financial Services Group and EverBank Financial.

Others, including Ameris Bancorp and Banc of California, could do well should "refi" demand keep declining. Most of Ameris' mortgage business comes from home loans people get when they first buy, not from refinancing, while Banc of California has ramped up hiring to focus on initial mortgages.

Associated Press
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