WASHINGTON -- While mortgage bankers slash their staffs, the nation's largest thrifts are licking their lips in anticipation of higher business.
"This is our time to shine," said Mario J. Antoci, chairman and chief executive of American Savings Bank in Irvine, Calif., who has doubled his crew of loan agents to 280.
Like many other large California-based thrifts, American Savings expects that higher interest rates, which have driven consumers back to adjustable-rate mortgages, will give thrifts the chance to gain back the market share they lost in recent years.
Based on the projected strength of the ARM market, the Savings and Community Bankers of America is forecasting that thrifts will make a third of all home loans this year. That would be a jump from their 23% market share last year, and a step back toward the 49% it enjoyed in 1980, when the industry was flying high.
Mortgage bankers, who have seen their market share rise from 35% in 1990 to 52% last year, say their share will remain unchanged, according to projections by the Mortgage Bankers Association.
At American Savings, loan agents received almost $1 billion in applications in April, and the thrift expects to do more business this year than last.
Alignment Sought with Thrills
Meanwhile, mortgage bankers are trying to align themselves with thrifts to better cash in on the ARM market. Countrywide Credit Industries, Pasadena, Calif., and North American Mortgage Co., Santa Rosa, Calif., for example, have approached American Savings to see if the thrift would be interested in buying ARM loans from them.
"Mortgage brokers and mortgage bankers will now take their proper position in this world," Mr. Antoci said.
"Unless they can sell to portfolio lenders, they will experience a substantial contraction of their market shares," he said.
Experts attribute the sudden shift in the fortunes of ARMs and large thrifts to the unusually wide spread between rates on a fully indexed ARM and on fixed-rate loans.
Indexes Continue to Fall
While fixed rates have risen sharply in the past couple of months, reaching almost 9% on 30-year loans last week, some popular indexes for ARM loans, particularly in California, are still falling.
Lenders of all kinds are seeing an increase in ARM applications. But at large thrifts that have made the product their forte, the trend is especially marked.
At the nation's largest thrift, Home Savings of America in Irwindale, Calif. 99% of all loan applications received in the first 10 days of May were for ARMs. Of loans funded in that period, 95% were ARMs.
By contrast, last year the thrift did only 73% of its loan business in ARMs.
The rest were fixed-rate mortgages, and like mortgage bankers, thrifts sold those loans into the secondary market.
In such strong ARM demand, thrills at last smell the chance to expand their portfolios.
"Thrifts now have the opportunity to replenish the runoff," said Sam Lyons, senior vice-president of mortgage banking at Great Western Bank in Chatsworth, Calif.
But they will still not be able to make up all the ground they lost in the refinance boom, he said, because overall real estate lending is down.
Savings and Community Bankers projects that thrifts will sell "substantially less" than the 42% of total production they sold to the secondary market last year, according to Robert R. Davis, director of economics and research at the trade group.
While mortgage bankers are casting about for new relationships, the secondary market agencies that buy the bulk of their business are sharpening their ARM strategies as well.
Fannie Purchases Plunge
At the Federal National Mortgage Association last month, mortgage purchases fell sharply from their highest point in the first quarter, according to Frank Demarais, vice president of product development.
Fannie Mae is responding in part by attempting to buy or securitize ARM loans from thrills, Mr. Demarais said.
That is the "natural tendency" for both secondary agencies as volume drop, said Mr. Lyons of Great Western.
But this year, at least, he expects the agencies will have few takers for their deals.
