Pipeline: Disappearing ARMs

American Banker (08/14/08) P. 8; Colter, Allison Bisbey
Freddie Mac reports an increase in prime borrowers refinancing one-year conforming adjustable-rate mortgages and opting instead for conforming fixed-rate mortgages to 97 percent in the second quarter from 92 percent in the first quarter. Over the same period, prime borrowers opting for conforming fixed-rate mortgages when refinancing conforming hybrid ARMs rose to 87 percent from 80 percent. According to Freddie Mac chief economist Frank Nothaft, "Even though refinancing borrowers who take out a one-year adjustable-rate mortgage today would save about three-quarters of a percentage point in rate, relative to a five-year ARM or 15-year fixed-rate mortgage, the concerns about . . . future interest rate increases may be causing borrowers to choose the safety and certainty of fixed rates." Also playing a role, he says, is the absence of teaser rates.