03/11/2013 06:34 pm ET Updated May 11, 2013

Refinancings Come Into Focus

Recently, I've met with quite a few people refinancing their homes. They are not cashing out on higher equity; in fact, many of the homes are barely bobbing above the water line. These homeowners are moving from interest rates over 6 percent down into the 3 and 4 percent neighborhoods.

Though I'm not a naturally nosy person, lots of borrowers are chatty. Many share how they've relentlessly requested, beseeched, pleaded with, badgered, and even begged their lenders to reduce their rate. At the end of their stories of supplication to the great and powerful underwriters hiding behind the mortgage lenders' curtains, I compliment them on their determination and endurance. Then I ask, "So how much will you be saving monthly?"

The answers usually range from $200 to $800 monthly, to which I usually respond, "Great! That's a lot of money!" I'm not blowing smoke or merely making conversation. I'm living in the midst of a stagnant Long Island economy, and the money staying in my neighbors' pockets carries with it great expectations.

After I comment, the borrowers become more talkative. That friendliness is not unusual; over the course of 30-plus years as a real estate attorney, I've talked to lots of people refinancing their homes. However, recent conversations have been unlike my past chitchat with serial equity flippers. Those cash-out borrowers were the ones who'd bide their time between mortgage finance transactions, waiting until their home's increasing value again exceeded their ever-mounting credit card bills. The plush-on-paper house owners would happily tell me about fantastic places they had dined, share their cruising adventures, and hold little back about the merits of an equity-fueled high life. And three business days later, when they'd return to pick up checks from their lenders for $50,000, $75,000, or $100,000, they'd make merry once more.

These days, the dialogue with refinancing borrowers is decidedly different. The revelations about how homeowners will be spending their mortgage savings are invariably unexceptional. The front runner for intentions is pay down my credit card bills, followed by reduce my student loan balance. In a very distant third place is the mention of adding money to the local or national economy by replacing or upgrading anything (like braces for the kids or newer cars). If we're looking for an economic rising tide to carry all our boats, I don't see it locally just yet. I see the holes in leaking vessels being plugged, while those onboard are still carrying excess weight.

As a single practitioner, I can't make big-picture predictions on where our nation is heading. However, looking through the lens of my closing camera, I do see what's developing as lenders loosen their negative nooses. I'm witnessing increased numbers of homeowners who'll be directing their new money towards old debt, and while that's a big positive, there's no short-term gain for local businesses. However, the photo album I'm leafing through definitely has more smiling faces than I've glimpsed in quite a few years.