Low rates keep lenders busy/ Mortgage firms swamped with refinancings

0 Comments | Gazette, The (Colorado Springs), Aug 23, 2002 | by Rich Laden

Employees at Vectra Bank Mortgage Group are working six days a week. Some employees at Intermountain Mortgage Co. are putting in 10- and 11-hour days.

Some of the lowest mortgage rates in decades - hovering at about 6.25 percent Thursday - have triggered another wave of refinancing by homeowners, and lenders are hustling to keep pace with demand.

"We're definitely doing overtime," said Hutch Hutchison, market area manager for Vectra Bank Mortgage Group in Colorado Springs.

Refinancings typically make up about 15 percent of Vectra's loan volume in August. They account for half of that activity now, Hutchison said.

Wayne Bland, branch manager of Intermountain Mortgage in Colorado Springs, said telephones aren't ringing off the hook. Loan originators, closers and underwriters, however, are working an extra two or three hours every day.

"We are busier than at any time this year," Bland said.

A reduction of a percentage point, or more, in mortgage rates can allow homeowners to slash house payments by thousands of dollars annually - depending on the loan amount and interest rate.

Bland said one customer he worked with in recent weeks refinanced her town home, switching to a 6.25 percent, 30-year fixed-rate mortgage from a pair of higher-rate, first and second mortgages. The result: Her payment dropped to about $810 from $1,023 - a $213 monthly savings.

"Those are the fun things. Those are the success stories," he said.

Mortgages rates drifted downward during the past several months and sparked waves of refinancing.

Rates moved lower in recent weeks, touching off more homeowner interest.

Rates for 30-year mortgages rose slightly this week - 30-year fixed-rate mortgages edged up to a nationwide average 6.27 percent from 6.22 percent, according to a survey released Thursday by Freddie Mac, one of two organizations created by Congress that buy loans from lenders and package them to sell to investors.

Nevertheless, last week's 6.22 percent rate was the lowest in 32 years of records kept by Freddie Mac, and continues to fuel homeowner interest.

Earlier this week, the national Mortgage Bankers Association reported mortgage applications hit a record level last week, according to the group's survey of mortgage applications for home purchases and refinancings.

"The current low rate environment should continue late into the year," predicted Doug Duncan, chief economist at the mortgage group.

Mortgage rates have fallen in recent weeks as economists slashed economic growth forecasts for the rest of the year because of concerns stock market turmoil will trigger a new wave of job layoffs and reduced consumer spending.

- Rich Laden may be reached at 636-0228 or rladen@gazette.com

REFINANCING THE AMERICAN DREAM

How do lower interest ratesaffecthime payments?

Find a homethat sells for $177,450, which was the median price in El Paso and Teller counties in July.

Make a down payment of 20 percent and you're left with nearly $142,000 to finance.

On a 30-year, fixed-rate conventional loan, monthly principal and interest payments - excluding taxes and insurance would be:

$1,041.58 at 8 percent

$944.40 at 7 percent

$851.06 at 6 percent

Source: Intermountain Mortgage Co. Colorado Springs

TO REFINANCE OR NOT?

Lenders say homeowners should weigh several factors:

How much will you save? Homeowners must pay closing costs when they refinance, which can run thousands of dollars. They should be able to recover those costs within two years through savings from lower payments.

What's the best option? Determine whether a 30-year loan or a 15- year loan best meets your financial needs.

Who offers the best deal? Shop around. Rates won't necessarily vary, but ask about fees and closing costs.