Despite higher interest rates and an icy home-loan refinance market, mortgage production in Arizona, Nevada, Colorado, Utah, and Idaho, is improving -- truly. and lenders know it.

According to TRW Redi Property Data, the number of loans to buy homes in Nevada, for example, jumped 60% in the first quarter to 1994 from the same period last year. Home-purchase lending in the other states is also higher.

Fewer refis are not cutting into the region's production as dramatically as in other states, lenders say. That's because last year, refinances accounted for 67% of Nevada and Arizona's total originations, for example, according to TRW. In California, 80% of all loan were refinances.

"It's no secret the region is doing well, and that hasn't been lost on lenders," said Mark M. Zandi, chief economist, Regional Financial Association, a West Chester, Pa., consulting firm.

Mr. Zandi said the region has been benefiting from relocating Californians, improving economies, corporate moves, and large construction projects.

Tough Competition

But with improving economies and hot lending opportunities have come fierce competition and deadly pricing.

"It's one thing to have originations volume, it's another thing to have profits," Mr. Zandi said.

Dennis M. Culver, divisional sales manager of the Southwest for Northwest Mortgage Inc., said competitive rates will make today's pristine lending spots -- such as Colorado Springs, Reno, and Tucson, Ariz. -- battlegrounds for market share.

"Pretty soon the consumer will start demanding to get the best possible price without consideration of the service level," Mr. Culver said.

Corstan Inc., a Las Vegas mortgage company, has felt the squeeze of competition. Although the state's loan production is up, Corstan, a small but established Nevada lender, experienced a 20% drop in retail originations last month over the same period in 1993.

Trying to Maintain Share

Today competition is so fierce, Corstan is not trying to gain market share, only maintain it, he said.

Weyerhaeuser Mortgage Co. dominates Nevada lending. The Woodland Hills, Calif.-based lender has more than double the market share of its nearest competitor there, according to TRW.

Mr. Zandi of Regional Financial Association said fierce competition is developing around the Mountain States.

Lenders in Arizona are already bloodied. Norwest Mortgage Inc., headquartered in Des Moines, has a lead of less than 1% over the state's next-most-successful lender, Banc One Mortgage Corp., Columbus, Ohio.

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