Though the economy has clobbered earnings and spurred layoffs across corporate America, the mortgage industry is basking in a refinancing boom — adding staff and gorging on new business.

Behind the boom is a six-month slide in rates, according to Freddie Mac data — from a peak last May of 8.64% to 6.79% in mid-January (and 7.02% after an uptick in last week’s report).

And in the wake of the Fed’s dramatic 50-basis-point cut on Jan. 3, many borrowers have finally taken a good look at rates and are making a move to refinance, take a home equity loan, or buy a home, lending officials say. That is leading to predictions that 2001 could be as strong as 1998.

“We are experiencing a surge in demand,” said David Doyle, executive vice president of consumer direct production for Countrywide Credit Industries Inc. of Calabasas, Calif. Production is substantially ahead of 1998, he said.

Mr. Doyle said that Countrywide is staffing up in both its branch system and centralized operations, as well as getting more productivity from the existing sales force by extending hours and adding business days. “Right now we have a tremendous appetite for new, talented people,” he said.

Across the industry, from traditional lenders like Countrywide to pure Internet mortgage companies, officials say January has brought a surge of consumer demand, which has forced them to extend operations by hiring or having people work overtime.

“Our business started really picking up on Jan. 3,” said Daniel Harris, chief executive officer of Lowestloan.com Inc. in Valhalla, N.Y. “The next day it was almost beyond our control.”

Mortgage applications continue to pour in. They soared 44.6% in the week that ended Jan. 12, according to the weekly applications survey by the Mortgage Bankers Association.

In addition, refinancing represented 64.1% of total applications in the week, up from 54.6% the week before and just 13.1% in mid-July. Adjustable-rate mortgages, which made up as much as 28.5% of the total in late May, were only 12.6% in the Jan. 12 week.

Lowestloan’s business has increased fourfold, Mr. Harris said, bringing the welcome challenge of maintaining adequate staff to handle the influx.

“Our sales staff is very busy, but we’re managing it,” he said, adding that Lowestloan, an online lender backed by financier Carl Icahn, plans to double its staff in the next six months.

Mark Pappas, president of MortgageIT Inc. in New York, said that most of the refinancing has been movement from adjustable-rate to fixed-rate loans. He said that 1999 and 2000 were big years for ARMs but that with rates falling to their lowest point in almost 18 months, those products are vulnerable to refinancing.

He said that when the conversion is exhausted there will still be a huge market for traditional refinancing and for straightforward purchasing.

“It’s a softer purchase market. But now that interest rates are lower, people are contemplating buying again,” Mr. Pappas said. “Rates have come down almost a point in the last two months, and it’s re-energized the purchase market in January, which is not traditional.”

MortgageIT has reacted to the flood of business by extending hours and initiating a “tremendous” hiring phase, Mr. Pappas said. “There’s a lot of activity and a lot of excitement — and a lot of inquiries.”

Most officials agreed that, despite months of declining rates, borrowers did not seem to notice until the Fed acted earlier this month.

“The Fed’s rate announcement was the thing that really created consumer awareness,” Mr. Doyle said. “We saw rates declining quite steadily during November and December, but the media hadn’t grabbed it.” He said the presidential election had so dominating the news that the drop in rates had gone largely unnoticed.

Now, however, with borrowers paying attention and refinancing on the increase, 2001 could even rival 1998, when there were $1.57 trillion in originations, according to data from the MBA.

Refinance activity drives volume in the mortgage business, Mr. Harris said, and will be the thrust needed to propel the year’s origination volume.

And if rates stay in the 7% range, the current environment will be sustained, Mr. Pappas said.

“We are all anticipating the next [Fed] meeting on Jan. 30 will bring another dip in the rate, which will add more fuel or more excitement and more awareness,” which is the key to increasing volume, he said. “Rates are low right now, but the key is awareness.

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