As mortgage bankers gather in New York this week for a major convention, they are divided over the outlook for the rest of the year.
To some, last week's bond rally was the eagerly awaited sign that interest rates are at last swinging in favor of mortgage bankers.
They maintain that falling rates will stimulate spring homebuying. And, they say, with rates on the standard 30-year fixed rate mortgage slipping toward 8%, some homeowners who hold adjustable-rate mortgages are ripe for refinancing.
But others caution that consumers are unsure of the economy - and that homebuying will likely slip as a result.
The debate is sure to heat up this week on the podium and in the corridors as the Mortgage Bankers Association of America holds its annual secondary market conference. Some 1,500 people are expected at the four- day event.
Rick L. McGuire, executive vice president of Inland Mortgage Corp., Indianapolis, is among the optimists about the market.
Mr. McGuire said his company's business has benefited this year, as rates have edged downward.
"If rates continue to improve, we think business will get better," Mr. McGuire said. "Our business is more related to interest rates than it is to employment bases and economics."
"This rally has saved many mortgage bankers who were right on the cusp of shutting their doors," said Jeffery S. Detwiler, group senior vice president at GMAC Mortgage Group of Bloomington, Minn.
With its 30-year mortgage at 8.25%, Inland is toying with an advertising campaign aimed at borrowers whose ARMs are due to adjust to about 8%, Mr. McGuire said.
Luke Hayden, executive vice president of Chemical Residential Mortgage Corp., is more guarded.
Mr. Hayden said loan originations at Chemical were lower than expected in April. And he predicted that current rates would lead to only a "minor" increase in purchase activity.
Chemical is offering 30-year loans at 8%, and Mr. Hayden said he expected rates to remain at that level.
As for refinancing, Mr. Hayden said he expected refinances would pick up, if rates were to fall to about 7.75%. But with its own large portfolio of ARMs, Chemical faces a "complex" decision on how actively to go after refinancing borrowers, he said.
Sam Lyons, senior vice president of mortgage banking at Great Western Bank in Chatsworth, Calif., said the thrift was expecting an increase in ARM refinancings.
Countrywide Credit Industries of Pasadena, Calif., has already begun a campaign targeting ARM borrowers, Mr. Lyons said.
Beyond the perennially absorbing topic of interest rates, lenders say the hot topic at this conference will be industry technology.
Both the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp. are designing automated underwriting systems to speed up the process of writing a home loan. Fannie Mae is also designing an origination system that would automate the applications process.
Mr. McGuire of Inland said he believed that the increasingly fierce competition on this front between the agencies is approaching "war."
He said he expected most lenders to use technology from one agency or the other, but not both. As a result, lenders will tend to sell most of their loans to the agency whose technology they use, he predicted.
Right now, many lenders make a point of dividing their business almost evenly between Fannie Mae and Freddie Mac, and the two agencies compete vigorously on price.
Mr. Hayden of Chemical advocated caution in choosing new technology.
"It's tempting to just jump on the bandwagon and go along" with Fannie and Freddie, Mr. Hayden said.
But he added that lenders should probably wait to get a better sense of which of the two systems would end up a survivor.
"My sense is that being patient and waiting a bit might pay some dividends," he said.