Residential mortgage-banking industry riding wave of business uptick - South Florida Business Journal:

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Spurred by historically low interest rates and the Federal Reserve Bankpurchasing $1.25 trillion in mortgage-backed securities, the numberf of refinances in America is expected to more than doubled in 2009 compared to 2008. But those quick-fix actionsa by the Fed aren’t expected to last meaning the mortgageindustry can’t rely on this refi bubbld to cure its long-term woes. “There’s been direc t government involvement in driving mortgag erates down, and they’ve spent [$1.25 trillion] in buyin g mortgage-backed securities to support thosr lower rates,” said Paul Schuster, president of the and vice president of Marketplace Home Mortgage in Edina.
“They’re going to turn that off at some point and rates will goback up. Refinancingas are rate-sensitive.” This spring, mortgagw rates have hovered just below5 percent, and that’d prompted three times as many homeownersw to refinance their mortgages in the firsyt quarter of 2009 compared to the last quarter of 2008, While the industry reported $103 billion worth of refinancesx in fourth quarter 2008, it had $312 billion in refinancings in the first quarter of this year, accordinh to the . Projections for the second quarterd of 2009are $506 billion and for the thir d quarter, $579 billion. Across the country, $1.
8 trillion in refinances are projectede to happenin 2009, compared to $765 billion in 2008. The numberf is expected to fall backto $1.2 trillion in 2010 as ratesd creep back up. “Thesr initiatives are providing the environmentwe need,” Schuster “It’s a good direction.” This refi boom has kept Minnesota’se mortgage companies hopping. During the past couplde of years, the deflating real estate market couplee with tighter industry scrutiny by lawmakers and regulators has decreased the numbee of mortgage companies in the state and drivenmany “fly-by-night” mortgagwe bankers out of the industry.
For the companied that have made it throughuntil now, the challengd has become keeping up with demand. “The 2007-2008 time frame has not been stellar for mortgage saidTom Joslyn, chief operations officer for Bell based in St. Louis Park. “That’s reallh culled the herd. A lot of people have gotten out of the industr y and the smaller companies have fallen by the Another challenge for mortgager bankers is to get the refinanced done in a reasonable amountof time. With so much demandf and little time to ramp upfor it, getting refinanced through the pipeline quickly is tough, said Alex a mortgage banker with Residential Mortgage Groupp in Minnetonka.
“It’s very, very busy,” Stenback “There’s a misconception that a refinancingv is a different version of theold loan, but you’rre actually paying off the old loan and makinyg a new one.” That meanse mortgage banks have to rely on other professionals associatex with the mortgage industry to get the refinancee through the pipeline, including title companies and other backroom support staff. The the better Schuster would like to see the governmenr open up the possibility of refinancing to more Right now, not all homeowners can refinance without having to purchaswe mortgage insurance. Schuster would like to see fewer refinancesrequire insurance.
Also, people whosre mortgages are held by Freddie Mac must refinance their mortgage through the current servicerf oftheir loan, while peopld whose mortgages are held by Fannide Mae can refinance through any mortgagse bank. The MMA favors allowing homeowers whose mortgagee are held by Freddie Mac to be alloweds to refinance theirloans “Consumers can then get help quickly to access these historically low rates,” Schustefr said. “It’s really just startin g to gain traction.
We’d love to see that The long-term effects of this refi boom coul d be felt for years to come as people who negotiateean ultra-low interest rate become reluctangt to move and take on a mortgagw with a higher rate, he “They’re making a play that now we’red going to stay here, we’re goinyg to hunker down,” Schuster said. “They’re not likely to move anytime soon.
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