A colleague who was looking to refinance his mortgage to today’s record low interest rates, just told me that he opted instead for a “modification.”

No, he’s not behind on his monthly payments, nor even struggling to make them. He is current, and modifications on current loans have been around for years, though they are increasingly rare and consequently few people know about them.

My colleague’s bank, New Jersey-based First Niagara, allowed him to do the modification to a lower interest rate. Here’s the best part: My colleague had to pay just $500 for his 7/1 Adjustable Rate Mortgage (ARM) to go from 4 percent to 3.125 percent, which is an eighth of a percentage point above the going rate, but still a great move. No principal payment, no new underwriting, no nothing.

I called First Niagara and asked if they do mortgage recasts. The first agent said yes, but when I asked to be transferred to a mortgage specialist, and then identified myself as a reporter, I was disconnected … three times.

On the fourth try, I did finally get a nice agent, who called another department and said yes, they do modifications, but more often do “recasts,” in which case a sizeable principal payment is required. Hmmm. Then she said she had to leave a message for someone to give me more details. Still waiting.

Apparently mortgage recasts do exist.

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We’re always looking at indicators to see where the housing market is headed, like today’s reading of the Realtors’ “Pending Home Sales Index,” which measures contracts signed for home purchases, hence an indicator of future closings. We look at consumer confidence, construction permits, even employment numbers to gauge housing’s future, but what about remodeling as an indicator?

Today the National Association of Home Builders put out its quarterly remodeling index, which rose to the highest level since 2006.

What does remodeling say about home buying? I think it says two things.

At the top of a housing bubble, there’s a lot of remodeling because a lot of people are buying a lot of homes, and they naturally want to put their personal touches on those homes. We also saw a lot of remodeling during the housing boom because so many borrowers took all that bloated equity out of their homes to pay for new kitchens and bathrooms and swimming pools and “man caves” (I really really hate that term).

Remodeling plummeted during the housing crash because of negative equity, lack of home buying, and zero confidence in housing as an investment. Not to mention that nobody wanted to spend a dime of whatever cash they had on anything.

So now as we bump along the bottom and anticipate a potential double dip, why would remodeling improve?

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