It is unusual to have a refinance boom in the middle of a foreclosure crisis. In the 1930s, which was the last time we had a foreclosure crisis comparable in magnitude to this one, lenders were so spooked by the foreclosures that there was almost no refinancing. That changed only after the creation of the Home Owners Loan Corporation (HOLC) in 1933, which refinanced many borrowers at the government's risk. The refinance boom today is also fueled by government. With few exceptions, refinanced loans are either being sold to Fannie Mae or Freddie Mac, or insured by FHA. The requirements of those agencies largely dictate who can and cannot profit from a refinance. The refinance decision involves a comparison of what a borrower has with what he can get. If he is currently paying 5 percent and can refinance at 4.5 percent and no fees, he will profit from the refinance. If he is currently paying 7 percent but the best he can get in the current market is 7.5 percent, he can't. Bor...
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