Harris Trust predicts a surge in trading up.

Analysts at Chicago's Harris Trust Corp. are expecting homeowners to start trading up to nicer houses rather than fixing up their old ones. And that should stimulate the demand for purchase mortgages, they say.

The impulse to trade up is a timely one, says Brian Israel, a vice president in Harris' residential mortgage division. He and his colleagues expect refinancings to slow next year.

"We've told our mortgage originators to [expect] handling 50% to 75% fewer refinancings," Mr. Israel said.

Steady Rates Foreseen

But Mr. Israel is also expecting mortgage rates to hold fairly steady next year. "Inflation still seems under control. Nafta passed, and that should steady the bond market," he said. "And economic growth is improving but still slow. All of these things point to mortgage rates holding in their current range for the foreseeable future."

The analyst said he was not worried about the recent increase in mortgage rates. "Most analysts see this as more of a correction than anything else," he said.

Did applications for mortgage refinancings drop sharply during Thanksgiving week? The latest figures from the Mortgage Bankers Association suggest they did, and that would make it 11 straight weeks of declines. The index for the week was 879.0, down from 1,105.1 a week earlier. The year's high of 1727.3 was reached the week of Sept. 10.

But that may not be the end of the story, which could still be a week off. If the holiday had a big impact on the week's figures there may not have been a real decline.

The association's methodology looks at the weeks surrounding the holiday to determine whether there was a lag followed by a catch-up, or some other kind of disruption. If so, it will adjust the numbers later this week.

Independent credit-reporting agencies have been worried that Fannie Mae and Freddie Mac have been excessively lenient in allowing lenders to substitute a merged credit file from the three national repositories for a full-scale credit verification update.

As reported here last week, Freddie Mac is indeed allowing a merged file, but only on negotiated transactions. Now a Fannie Mae spokeswoman reports that Fannie also allows a merged file, but only when credit standards are very high. The minimum loan to value, for example, must be 70%.

American Residential Mortgage Corp., La Jolla, Calif., has been a hot company recently, winning over a growing cadre of analysts and investors. Sy Jacobs of Alex. Brown & Sons, Baltimore, says it "typifies the well-balanced, market share pining mortgage banker."

Continuing its push for market share, the company announced last week it had opened four new regional offices in the Southeast and sees strong housing markets in the area. The offices are in Orlando, Fla.; Atlanta; Charlotte, N.C., and Memphis. They will serve both retail and wholesale markets.

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