On April 16th, Federal Reserve Chair Janet Yellen, spoke at the Economic Club of New York and stated that if forecasts hold true, the economy is on its way to the best place it has been in nearly a decade.
This improved economic health will affect the real estate and title insurance industries.
Decline in Refinances
As the economy improves, interest rates should begin a slow rise. In a rising rate environment, there will be fewer refinances – and this is already happening.
The United States is still recovering from the 2008 housing crisis, and many homeowners have mortgage balances that are higher than the value of their homes. As home values rise, some homeowners will be able to refinance their old mortgages. Many of those old mortgages would be adjustable rate mortgages, with stepped up rates that are higher than current fixed rates. While it is unlikely that there will be another dramatic burst in the refinance market, title insurance companies should continue to be prepared for a slow and steady stream of refinance orders.
Purchase and Foreclosure Transactions
As refinance transactions decline, sale orders will become more important to title agencies. Purchase transactions are generally more complex than refinances, and title companies should plan on additional processing time in their production departments.
Title companies should also be prepared for some foreclosures that still need to be closed out, most of which should be handled within the next 18 months.
Continue reading for the second half of this blog series that covers regulatory changes and their impact on the title industry.