Business at the two largest independent mortgage companies is the strongest it has been since the boom in refinancings ended two years ago.
No. 2 North American Mortgage Co. funded $853 million of loans in March, up 80% from the level in March 1995. It also reported $1.6 billion in purchase loan applications last month, a 77% increase over the year-earlier period and the largest in two years.
Mortgage economists are expecting originations nationwide to climb by about 20% this year, to about $775 billion, and the figures from the two mortgage companies make the estimates look conservative.
North American's gains were in part a result of the improving California housing market and an effort to expand relations with builders and real estate agents, said John F. Farrell Jr., the Santa Rosa, Calif.-based lender's chairman and chief executive.
North American serviced $13.6 billion of loans in March, with a delinquency rate of 2.93%. The company's servicing portfolio is little changed because it typically sells loan servicing rights shortly after origination to avoid the risk of writedowns as interest rates change.
Countrywide Home Loans, the nation's largest home lender, funded $3.6 billion of mortgages in March 1996, a 69% increase over fundings in March 1995. Refis represented 51% of production.
The Pasadena, Calif.-based company's pipeline of $6 billion at the end of last month was the highest in two years, said Angelo Mozilo, vice chairman of the parent company, Countrywide Credit Industries.
In a report reaffirming his buy recommendation, Richard K. Strauss, a stock analyst at Goldman, Sachs & Co., said the mortgage industry had consolidated significantly since the crash of the bond market two years ago.
"Pricing power is concentrated in fewer hands, of which CCR's is certainly one of the largest," he said. He added that the company's push to build its brand name was increasing its retail production.
Industry consolidation and the yield curve have also benefited North American.
Countrywide's servicing portfolio was $138 billion at the end of March. Delinquencies were 2.98%.
In its recent push into home equity and B and C lending, Countrywide originated $27 million of home equity loans and $76 million of B and C credits. The lender originated none of those types of loans in March last year.
Home equity and B and C loans have been a hot area in recent months, with many lenders attracted to the markets by the high margins at a time when competition has driven margins down in conventional lending.