|
Mortgage refinancing surge sends banks into overtime
|
Paul Gores
The Milwaukee Journal Sentinel
January 18, 2009
|
After obtaining a mortgage at 6% to buy a house in Pewaukee last July, Lyle and May Landowski never stopped watching interest rates.
As mortgage rates started heading toward 5% in late fall, the couple prepared to refinance. Two weeks ago, they decided not to wait any longer. They locked in a refinanced mortgage at 5.125% through Landmark Credit Union, shaving about $150 off their monthly house payment.
Lyle Landowski's advice: "Jump in. Now's the time."
A lot of other Milwaukee-area homeowners are doing just that. Lenders say they are being bombarded by applications for mortgage refinancing as interest rates, driven downward by a weak economic outlook and government efforts to spur mortgage activity, hover around 5%.
Some think the refinancing boom could end up rivaling the tsunami of refinancings in 2003. The new surge has prompted banks to reassign staff to mortgage processing and work extra hours. It also is likely to lead to a slowdown in completing applications because some steps, such as appraisals, are taking longer as backlogs form.
At the same time, the new wave of refinancing is introducing homeowners to tougher borrowing standards than those that existed only a few years ago.
"I don't think there's anybody in this business right now who isn't working dawn to dusk to keep their customer base happy," said Mike Carroll, sales manager in the mortgage lending department at Sunset Bank & Savings in Waukesha.
Many local lenders last week were offering 30-year fixed-rate mortgages just above 5% - a rate Michael T. Crowley Jr., chairman and chief executive of Bank Mutual Corp., called "kind of the magic number."
Crowley said the Brown Deer-based bank has added staff in its Milwaukee and Green Bay mortgage processing centers to handle the growing load of applications.
"We're swamped," said Charlie Miller, CEO of Citizens Bank of Mukwonago. "We have some people working long hours."
North Shore Bank's volume of mortgage loans is 10 to 12 times more than expected, said James McKenna, CEO of the Brookfield-based bank.
"I've never seen in all my years with the bank the kind of volume we are experiencing now, and the overwhelming majority is refi," McKenna said.
Lowest rates since 2003
Mortgage buyer Freddie Mac reported that the average rate on a 30-year fixed-rate mortgage for the week ending Thursday was 4.96% with a point of 0.7. Mortgage borrowers in Wisconsin traditionally choose to avoid points, an up-front fee charged by lenders, preferring to pay a slightly higher interest rate.
The personal finance Web site Bankrate.com reported that average mortgage rates, which can fluctuate daily, are at the lowest level since June 2003.
Homeowners going to a lender for refinancing will find stricter standards to qualify for the best rates. Lenders said that after subprime mortgage defaults that triggered the nation's financial crisis, the creditworthiness of borrowers now is being assigned the importance it should have had all along.
Government-owned Fannie Mae, which buys mortgages from lenders, is looking more closely not only at credit scores, but factors such as whether the refinanced mortgage will include other debt or second mortgages. Fannie Mae is charging fees - a small percentage of the loan amount - for loans that entail more risk. Those fees are being passed along directly to borrowers.
"All of a sudden we're seeing more factors put into the pricing structure than we've ever seen before," Carroll said. "You need somebody you trust to walk you through it."
Betty Feierstein, vice president of mortgage lending at New Berlin-based Landmark Credit Union, said although some people are impacted by the heightened scrutiny, "We're finding that it's not affecting that many people."
Some borrowers are surprised to learn when their appraisal comes back that the value of their house has fallen a bit, said Tracy Delimat, vice president of mortgage banking at Waukesha State Bank. That doesn't mean anything bad has happened to a particular house, she said. It's just the law of supply and demand. There are more houses on the market than there are buyers, which compels sellers to lower prices. That, in turn, can bring down the appraisal price on other houses in a neighborhood.
"It means the neighborhood itself has declined. You shouldn't take it personally," said Delimat, who also said Waukesha State Bank employees are working many extra hours to handle a sixfold increase in mortgage volume.
Johnson Bank already has its largest mortgage volume ever, said Jeff Cummisford, vice president and mortgage field manager.
"We've taken in just under half a billion dollars of loans in the last 45 days," Cummisford said.
Cummisford said the refinancing boom could turn out to be the biggest one he's seen in his 35-year career in the mortgage business, in part because technology makes it easier for potential customers and lenders to connect. For example, he said, Johnson Bank has a "rate watch" system that automatically sends people an e-mail to telling them when their target interest rate has been reached.
Landmark's Feierstein said that while the majority of the credit union's increase in mortgage business is the result of refinancing, there are a few home purchases woven into the deluge of paperwork being processed. She said if mortgage rates remain low, an improvement in the real estate market - something many experts say is needed to get the economy on solid footing - may arrive in spring.
"I think right now, we'd have a lot more purchases if it wasn't the dead of winter," Feierstein said.
Lenders said they hear from people who think mortgage rates will drop as low at 4.5% for a 30-year fixed mortgage because of the federal government's desire to revive the housing industry.
"Whether it's going to get down that low or not, I can't tell you. The government can't even tell you. All they can do is try. But some people are holding out for that," said Bank Mutual's Crowley.
Mortgage lenders say there's a risk in waiting too long to refinance. The low target may never occur, and in the meantime, the homeowner is making monthly payments at his or her existing higher rate.
"If you see a sure thing that's going to save you money and not cost that much, take it," said Brian Wickert, president of Accunet Mortgage in Butler.
|
|
|
|
© Copyright Johnson Financial Group | All rights reserved.
|
|
|
