How's the mortgage business? Much better, according to respondents to a survey by the Mortgage Bankers Association.
Of 35 national and regional mortgage lenders that participated, 32 reported increases in origination volume so far this year. The survey results were released at the MBA's annual secondary market conference last week in New York.
"Overall, mortgage bankers are encouraged not only by the decline in long-term interest rates but the trend away from adjustable-rate mortgages to fixed-rate loans, rising consumer confidence, and increasing application volumes," said Joe Pickett, president of the association and chairman of BancBoston Mortgage Corp., Jacksonville, Fla.
What's more, the reported increases are substantial. A majority said mortgage production had jumped more than one-third since the plunge in long-term rates began in late January.
The survey also confirmed that adjustable-rate mortgages have been losing market share. Industrywide, ARMs accounted for 44% of the mortgage market in March, down from the peak of 59% in January.
Mr. Pickett noted the narrowing of the margin between long-term and short-term rates. "The difference is making fixed-rate mortgages relatively more attractive for both home purchase and to refinance loans," he said.
He added that about half of the lenders reported customers are converting from ARMs to fixed-rate loans.
In FHA loans, about one-third of the lenders surveyed reported an increase in their FHA business in the last year, with the average being 37%. In addition, 68% of the lenders said they planned to expand their FHA business.
On a separate topic, Mr. Pickett took issue with a proposal by Sen. Bob Packwood, R-Ore., chairman of the Senate Finance Committee. The plan would repeal the tax deduction for mortgage loans of more than $250,000.
Mr. Pickett warned that the MBA would lobby heavily to block the Packwood proposal. It would affect two million people and dampen the housing industry, he said.
In the survey, Mr. Pickett reported, more than half the lenders were found to have begun offering alternative products, such as home equity loans and "B" and "C" credits.