ARMs as Refi Tool
It used to be that borrowers took out adjustable-rate mortgages mainly to buy homes, usually when rates were rising or when the homes were expensive. The low teaser rates made the purchases more affordable.
But the growth of hybrid adjustable-rate loans has helped ARMs become a popular refinancing option for the first time, according to a study published last week by LoanPerformance.
Unlike traditional ARMs, whose rates start adjusting immediately - leaving some borrowers susceptible to "payment shock" when the index rises quickly - hybrids have a one- to 10-year initial fixed-rate period.
Linda Lowell, a managing director at Royal Bank of Scotland's RBS Greenwich Capital, wrote in the study, which appeared in the LoanPerformance publication The MarketPulse, that this added security means current ARM borrowers are more willing to refinance into new ARMs. Even fixed-rate mortgage holders are "warming" to the idea of switching to ARMs, she wrote.
Citing the Mortgage Bankers Association data, Ms. Lowell wrote that in the 1990s, whenever rates rose (and refi applications fell), ARM applications also rose. But in recent years demand has grown for ARMs even when fixed rates have fallen or stayed low.
Though the recent surge in ARM demand came initially from jumbo borrowers, other customers followed suit, emboldened by the protection of hybrids and taking advantage of technology that continues to make refinancing easier, Ms. Lowell's report said.
Referring to a Jan. 22 Freddie Mac survey, Ms. Lowell wrote that hybrids are now the "bulk" of ARM originations.
Chase Center Closing
J.P. Morgan Chase & Co. will close its wholesale home equity processing and servicing center near Orlando over the next seven months because of its recent purchase of Bank One.
The Maitland, Fla., center has 150 employees; they were recently told the news, a spokeswoman said.
They may be able to find new jobs within JPM Chase, possibly at a 1,300-employee Bank One credit card call center in nearby Lake Mary, Fla., she said.
The Maitland center's processing work will be shifted to JPMorgan Chase's wholesale home equity processing centers in other parts of the country.
All loans in the West will be transferred to San Ramon, Calif.; those in eastern states will be transferred to Rochester, N.Y.
For now, the spokeswoman said, there will be no other closings or layoffs in processing and servicing for the wholesale home equity unit.
Citi Software
Reveleus, a New York analytics and technology firm, announced it will provide new credit risk management and marketing software to CitiMortgage and CitiFinancial Mortgage Lending.
According to Reveleus' chief executive, S. Ramakrishnan, the analytics program will be installed over the next nine months at the Citigroup Inc. units.
The program consolidates borrower information from various parts of the origination and servicing process, and segments loan portfolios by borrower type.
Mr. Ramakrishnan said each borrower is put "in a meaningful subset," helping credit-policy employees "see something they wouldn't have seen."
The organized information can then be used for pinpoint marketing.
