Owners rush to refinance homes/ Mortgages paid off set county record

Gazette, The (Colorado Springs), May 29, 2003 by WAYNE HEILMAN

Edward Loehr is refinancing his mortgage for a second time since he bought his five-bedroom, two-story home in northern El Paso County a year ago.

The self-employed software engineer first refinanced in the fall to cut his rate to 5 3/4 percent from 6 1/4 percent and will close a loan in July to cut his rate to 5 percent. He estimates the two refinances will save him $225 to $250 a month.

"I had never seen lower rates last fall and was surprised to see them fall again nine months later," said Loehr, who spent more than $1,700 each time he refinanced. "If you can spare the cash, it makes financial sense to refinance and lower your (mortgage) payment."

Loehr is one of a growing number of El Paso County residents who refinanced their mortgages multiple times as interest rates fell during the past year. Rates for 30-year mortgages fell last week to 51/4 percent, the lowest in more than 37 years.

County figures reflect the flood of refinancing. A record 10,415 county homeowners paid off mortgages last month. Most of those homeowners refinanced new mortgage loans at a lower rate.

Because the county doesn't track mortgage data alone, looking at the number of mortgages paid off is the best available indicator of refinancing, even though some homeowners paid off mortgages because they sold a home or now own it free and clear.

Refinances, as measured by mortgage payoffs, are at a record pace for the first four months of this year, up 73 percent from a year ago to 29,372. Last year, county borrowers paid off a record 65,734 loans, and that was nearly double the total for 2001.

"We are seeing history. I doubt we will see this again in my lifetime," said Warren Meacham, vice president of Auer Colorado Online Mortgage, which has a two- to three-month backlog of mortgages it is processing.

Many of the county's lenders report business is strongest from their own customers.

"We are seeing customers come back for their second and third refinances in the past 12 months," said Kelly Wells, downtown branch manager for Wells Fargo Mortgage. "We are seeing quite an increase in refinance activity," which is nearing record levels.

Wells Fargo did $213 million in mortgages in the county through April, nearly half the $448 million it loaned in all of 2002. Much of that was from homeowners refinancing loans to get a lower rate.

"It's crazy right now. We are at record levels. Every single month this year we have seen increasing volume, even in January and February, which are typically pretty dead," said Wayne Bland, president of Colorado Springs-based Intermountain Mortgage Co.

Rates aren't likely to go much lower without a round of economically devastating deflation, said Sung Won Sohn, the Minneapolis-based chief economic officer for Wells Fargo & Co., corporate parent of Wells Fargo Mortgage. Sohn is refinancing his own mortgage.

"It is just too good an opportunity to pass up," Sohn said. "Mortgage rates could still go lower, but these rates may be an over- reaction to concerns about deflation and could go higher if the economy rebounds."

TO REFINANCE OR NOT

The rule of thumb used to be: Refinance your mortgage if the new rate is at least 1 percentage point below the rate of your current mortgage.

Lenders now recommend refinancing if you can recoup the cost of refinancing - whether or not you pay those costs directly - through lower monthly payments within 18 months. If you plan to sell the home before then, don't refinance.

Some points to consider if you want to refinance:

Refinancing typically can cost as much as 2 percent of the loan amount to cover fees and interest and insurance payments from the time the loan closes until the first payment is due.

No-cost refinancing deals do have a cost. Borrowers typically pay a rate up to .5 percentage point higher to avoid up-front fees for refinancing. Borrowers can increase the loan amount to cover the fees but then will pay interest on that amount for the period of the loan.

Most major computer programs that help track your finances, such as Quicken or Microsoft Money, have a feature that will calculate whether refinancing makes sense. You can also go to www.quickenloans.com/lpcontent/CnUt Page/ql/content_3 col/mtc_refi_ intro.en.html to use an online refinancing calculator.

SOURCES: Auer Colorado Online Mortgage, Wells Fargo Mortgage, Intermountain Mortgage and Quicken.com