One More Chance
The refinancing boom may be ending, but it is taking its time.
The Mortgage Bankers Association said Wednesday that its market composite index, which measures applications for home purchase loans and refinancings, jumped 15.6% last week from the previous week.
Refis represented 55% of applications, versus 53% the previous week. The average rate on a 30-year fixed-rate mortgage rose 12 basis points, to 5.79%, the trade group said. Rates had hit their lowest levels since mid-July the week before.
Even though rates have climbed higher still this week, to around 6%, Stephen Dimarco, the director of mortgage sales at MidAmerica Bank in Chicago, said he expects refi volume to go up further as homeowners who did not refinance at the bottom realize they are still in the money.
"The news media haven't yet gotten the word out to the consumer that if you missed the boat, it's back at the port," he said in an interview Wednesday. "In the next week or two, you'll start to see those ads again."
This does not mean mortgage banks will be hiring. "People for the last month or so have been running a little fat, even after layoffs," Mr. Dimarco said, and lenders can handle the pickup with existing staff.
However, price competition has abated, he said. When rates spiked in August, "we instantly saw people go to very aggressive pricing," with some national lenders offering mortgages as much as three-eighths of a point below market. "You never know if it's the institution [cutting its margins] or the originator willing to cut their commission."
But "it's not so crazy now, because volumes are good."
Alt-A Special
Though rates rose during the third quarter, New Century Financial Corp. increased production by keeping its rates for Alternative-A loans steady.
In a press release issued Tuesday, the Irvine, Calif., subprime lender said it originated $8.6 billion of mortgages in the quarter. That was 126% more than a year earlier and 49% more than in the second quarter.
For September its production tallied $3.4 billion - up 179% from a year earlier, 16% from August, and 55% from July.
In the release, New Century chairman Robert K. Cole credited a "one-time marketing effort" aimed at Alternative-A borrowers. Carrie Morelli, its vice president for investor relations, said in an interview Tuesday that as part of the campaign it kept rates the same for the borrowers, defined by New Century as those with Fair Isaac credit scores around 650.
Alternative-A consumers may have found that they no longer qualified for Fannie Mae or Freddie Mac loans after market rates rose, and this may have created an opportunity for New Century, Ms. Morelli said.
Sept. Snapshot
If numbers from Transnational Financial Network are any indication, the boomlet came too late to boost companies' third-quarter results.
In a press release issued Tuesday, the publicly traded San Francisco mortgage bank said it funded $105 million in September - down 9% from August and off 39% from July.
In early September 30-year mortgage rates peaked at 160 basis points above the historic low reached in June, but late in the month they dropped by about 80 basis points, Transnational chairman Joseph Kristul noted in the release.
"Since the decline in rates largely occurred towards the end of the month, loan application rates began to increase ... too late to have a material effect on our September funding volumes," Mr. Kristul said.
