Low interest rates have homeowners beating down bankers' doors; Mortgage mania

Think it's impossible to have too much business? Talk to a mortgage banker.

"We're swamped," said Brian Marrs, a loan officer with Austinloan.com, a local residential loan company. "Two weeks ago, we had 56 cold calls for the week. It went to 116 last week, and it was over 160 as of Thursday." Marrs, 40, has been in the mortgage business for 18 years, and like many in his industry, he has never seen mortgage interest rates as low as they dipped this week. "When I got in the business," Marrs said, "rates were in the mid-10s and low 20s."

With the 30-year fixed rate averaging 6.22 percent, house sales have kept steady despite the sluggish economy. And with 15-year mortgages at 5.63 percent, many existing homeowners are rushing to refinance. It all adds up to extra business for mortgage writers.

At Mission Mortgage, a locally owned mortgage lender, applications for mortgage loans are up 50 percent in August compared with a typical month.

"Usually, the end of the month is crazy at any mortgage company, but it's been insane," said Andrea York, a loan officer with Mission. "The processors are completely loaded up and overwhelmed. I'll leave for lunch and come back, and there'll be 20 calls on my voice mail."

The current flurry of refinancing shatters the Mortgage Bankers Association prediction in March that home loans would fall 25 percent this year. Now, the association thinks the current tide will push mortgages to near last year's record of nearly .3 trillion.

The blood bath in the stock markets has pushed investors toward the safe harbor of bonds. With large volumes of bonds selling, mortgage rates pegged to government bond rates have plummeted over the past few months.

One of the strongest mortgage markets has been homeowners seeking to refinance. By refinancing, homeowners can save hundreds of dollars a month.

In some cases, the refinancing flood is yielding a crop of increasingly frustrated homeowners who can't get their own lenders on the line, particularly the large mortgage service companies affiliated with some of the major banks. That in turn has spurred business for many local, independent mortgage bankers and brokers.

Larry Doyle, a mortgage consultant with Milestone Mortgage Corp., a statewide mortgage loan originator, said he has heard those complaints from at least three customers who switched to Milestone.

"You get these automated answering systems and are put on hold for 30 or 40 minutes," Doyle said, adding that one such company didn't respond to his call several months ago when he intervened on behalf of one of its frustrated now-former customers. "You can't get a warm body. And nine times out of 10 when you call back, you get another person, so you're starting all over again. You just want to stick a gun in your mouth."

Several real estate agents, however, said they hadn't heard of any complaints among their home buyers.

One broker said three clients he sold homes to in the past couple of years all refinanced without a hitch.

Scott Chaffin decided to refinance about three weeks ago. He closed on the deal Friday, trading a 7.75 percent fixed-rate mortgage for a 4.85 percent adjustable-rate mortgage.

With the new rate, Chaffin said the monthly mortgage payment on his three-bedroom brick house in Round Rock will drop 5.

Chaffin plans to put the savings into his second lien, which he expects to repay in five years instead of 15. But he may soon need the money for a different reason. The telecommunications company Chaffin works for has just been bought out, and Chaffin may lose his job.

"I don't know what my future's going to be," Chaffin said. "I figured if I can reduce my mortgage payment, I would be in a better position if I lost my job to maintain my home for a short-term period."

Refinancing is not right for everyone, though.

In general, if refinancing can save you 1 point in interest, go for it, brokers say, but they caution that the financial circumstances for each borrower are different, so the decision should be made on a case-by-case basis.

Brokers say that before refinancing, homeowners should calculate how long it will take to recoup the closing costs, including a loan origination fee, appraisal and other costs that can run from ,000 to ,000. Many lenders have programs to help reduce those costs for refinance customers.

"It depends on everyone's situation," said York, the Mission Mortgage loan officer. "Some people are happy saving a month, and some wouldn't even consider refinancing if they weren't saving at least 0 a month."

Related links:

1. US mortgage market - colossus in a world of its own
2. Mortgage rates hit record lows; can it be time to refinance again?
3. Serial refinancers ride falling rates again and again