Refi Boom? Banks Not So Sure

In what's been called the worst housing crisis since the Great Depression. Home prices are sliding, foreclosures are mounting, and lenders are making fewer and fewer new mortgage loans.

The environment has brought untold pain to Wall Street, where lucrative mortgage-related business has dried up for once high-flying banks, which are now additionally burdened with bad debt on their books. And as the housing market continues to slump and the Federal Reserve slashes interest rates to stem a deepening economic downturn, some lenders are looking to mortgage refinancings as one way to boost loan production volumes during a challenging time.

Normally, refi waves typically come as the central bank cuts rates. Yet despite 225 basis points in cuts since September, mortgage rates are rising, not falling. Add concerns about inflation and general economic uncertainty, and many observers say it is unclear if the brief, modest pickup in the refi business seen at the start of 2008 can gain a foothold. ...