Confetti for all! <G>
Explosion in Refinancing Leaves Lenders Swamped
By Sandra Fleishman
washingtonpost.com
Washington Post Staff Writer
Thursday, September 19, 2002; Page E01
It's official: America is in the middle of the biggest mortgage-refinancing wave ever.
Driven by record-low interest rates, an "unprecedented" number of people have applied to refinance during the past eight weeks, the Mortgage Bankers Association of America said yesterday.
The "massive wave" of applicants "now surpasses the refinance wave that we experienced last October and November," the time of the previous high, said Phil Colling, an economist with the association.
The boom is saving homeowners money but stretching the resources of the lending industry and such related industries as appraisers, title companies, surveyors and even messenger services.
Some homeowners looking for loans complain of not getting calls returned. Bankers, brokers, title firms and surveyors say they are doing their best, working longer hours and adding temporary staff.
Surveys by the mortgage bankers and other groups that follow the lending industry have found rates at or near 40-year lows for several weeks, with 30-year loans available for around 6 percent. A tenth of a percentage point shift in the interest rate on a $100,000, 30-year loan means a difference of about $7 a month in the payment.
"We're definitely stretched," said Charles N. Vance, area manager for Wells Fargo Home Mortgage Inc., which is tied with Washington Mutual Inc. as the nation's biggest originator of home loans.
"Everything in the whole industry is backed up," said Jonathan Levy, vice president of Professionals Title & Escrow Co., based in Rockville.
While most firms are trying to hire and train new workers, industry players said they are benefiting this go-round from advances in computer technology that speed up processing and approval.
"In some cases, you can get an approval right off the laptop," Vance said.
New loan programs also allow borrowers to skip some steps in the refinancing process.
For instance, if existing Wells Fargo customers have good credit and want to refinance without taking out any cash, many are eligible for a "TimeSaver Refi," which does not require an appraisal or a full credit check.
The mortgage bankers group expresses the number of refinance applications as an index, rather than as a raw number. The group reported yesterday that the refinance index for the week ended Sept. 13 was above 4,000 for the eighth consecutive week.
That's the same number of weeks as during last fall's record boom. But the index this time has exceeded 5,000 for six of the last eight weeks and went above 6,000 two weeks ago.
In 2001, the index exceeded 5,000 only three times. (The index and the group's other loan-application indexes equaled 100 in March 1990.)
Mortgage industry players say one difference in this boom is that borrowers have jumped back into line again and again as interest rates have dropped because of the availability of "no cost" loans.
"Several borrowers have been back to me seven times over the last two years to refinance because they are in programs where the lender is paying for it all," Levy said.
Demand is so high, he said, that settlements are being held all month. In the past, borrowers tried to close near the end of the month to save on interest. Levy's Rockville branch is doing 10 to 20 closings a day.
The good times for borrowers will continue as long as the economy remains sluggish and there are no signs of inflation, Colling said.
Even if interest rates go lower, he said, he doesn't see how loan applications could increase, "because there are just so many applications that companies can take."
He added, "There are only 24 hours in a day, there are only so many people taking applications out there, and companies can only hire so many temporary people to help."
Bureau of Labor Statistics data show dramatic growth in the mortgage banking and brokerage industry. Preliminary estimates for August show 377,000 employees -- about 2,000 more than estimated for July and 17,000 more than in April. A year ago, the total was 335,500.
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