Prospect of Falling Rates Puts Sears in Bullish Mood
Sears Mortgage Corp., which emerged this year as one of the nation's top originators, says it's bullish on the fall market.
Though autumn is normally a slow time for mortgage bankers, home sales and refinancings should get a lift from low interest rates in the coming months, said Walter C. Klein Jr., president of the company. He reckons that rates on 30-year fixed-rate mortgages, now 9.3%, will drift closer to 9%, reflecting strength in bond markets.
"We may have a real estate autumn, if one appreciates that the things in the Soviet Union can be resolved without heightened world tension," Mr. Klein said in an interview Wednesday. He spoke amid reports that the coup against Mikhail Gorbachev was starting to collapse.
Early in the week, mortgage bankers were fearing that the winds of a renewed Cold War would chill U.S. consumers and push bond yields and mortgage rates upward. But such worries abated as the week progressed, and mortgage rates ended up little changed from last week.
Mr. Klein is in a good position to guess what's next for the nationwide market. His company, a unit of Sears, Roebuck and Co., sports offices in 32 states and is affiliated with the vast realty network of Coldwell Banker. The company sells most of its loans on the secondary market and funnels the rest to an affiliated thrift.
This year, Sears Mortgage is going full throttle. After boosting its sales force by 100 people, to 529, the company increased its originations a stunning 122% in the first half of the year, to about $4 billion. That moved the company to No. 5 nationwide, from No. 10 in 1990.
"We won't quite match the first half's volume in the second half, but it's going to be close," Mr. Klein said.
Sears' production surge comes on the heels of a major expansion in servicing. The company currently services about $17 billion of mortgages for investors, after acquiring a $6.6 billion portfolio last year from troubled Southeast Banking Corp., Miami.
Prospect of Refinancings
Given the sluggishness of the economic recovery, Mr. Klein says, it's quite possible that fixed mortgage rates will fall to 9% or lower in the coming months, continuing a downward trend that began about six weeks ago.
That, in turn, could bring out a new wave of homeowners eager to refinance. Just such a boom occurred earlier this year, after rates dipped under 10%.
Mortgage banking companies, which specialize in fixed-rate loans, would be the chief beneficiary.
Sears held back somewhat from the earlier refinancing boom, Mr. Klein said. The idea was to focus on its bread-and-butter customer who is referred by Coldwell Banker and other realty brokers.
But Mr. Klein may well launch a refinancing push before the year's over. "If nobody buys homes in November and December, which is fairly typical, that might be a good time for us to do some refinancing business."