Refi efficiency
Asset-Backed Securities glossary · Asset Backed Securities
Definition
The proportion of borrowers in a pool with in-the-money refi incentives who actually refinance; lower than 100% due to documentation, credit, or behavioral frictions.
Refi efficiency in plain English
Refinancing means swapping your old loan for a new one with a better rate — worth doing when rates have dropped enough that you'd clearly save money (that's being 'in-the-money'). Refi efficiency measures how many of the borrowers who SHOULD refinance actually do it. It's never 100%, because real people don't always act on the math: some don't want the paperwork hassle, some can't qualify anymore because their credit slipped, and some just never get around to it. It's like a store running a great sale — not every shopper who'd benefit actually shows up, and this number captures how many do.
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