Tri-City mortgagers see uptick in lending

By Ingrid Stegemoeller, Herald staff writer

Mid-Columbians have caught wind of rapidly dropping mortgage rates and area lenders say their business has picked up as a result.

"I think we've definitely seen an influx of mortgage applications," said Scott Mitchell, director of consumer lending for HAPO Community Credit Union.

HAPO's applications are up 35 percent so far over November, he said.

Eric Pearson, president and chief operating officer for Community First Bank, called recent activity a refinance boom.

"The only thing holding people back is they think (rates) might go lower," he said.

Refinance applications made up 69 percent of all mortgage applications during the short week of Thanksgiving, according to the Washington, D.C.-based Mortgage Bankers Association.

That's a more than 200 percent increase over refinance activity the previous week, though total mortgage application volume still was down about 22 percent compared with the same week last year, the association reported.

The plunging rates on 30-year mortgages this week are at the lowest level since January after the government launched a sweeping new effort to aid the U.S. housing market, according to The Associated Press.

Mortgage finance giant Freddie Mac reported Thursday that average rates on 30-year fixed-rate mortgages dropped to 5.53 percent this week. That was down from 5.97 percent last week, and the lowest since the week of Jan. 24, when it was at 5.48 percent.

The AP reported further drops could be on the way if the government launches an industry-backed plan to cut the rate on a 30-year mortgage to 4.5 percent by spending hundreds of billions to buy mortgage-backed securities issued by Fannie Mae and Freddie Mac.

That would follow an effort announced last week by the Federal Reserve, which is planning to purchase up to $600 billion of mortgage-backed securities and other debt issued by Fannie and Freddie and the Federal Home Loan Banks. Those institutions don't make loans directly to consumers, but provide money to the mortgage market by packaging loans into investments, according to the AP.

Local officials have mixed thoughts on federal actions to lower rates.

Manipulating the market generally isn't ideal, said Mark Manthei, a broker with Arboretum Mortgage in Kennewick.

"I don't think long-term that ever is the best plan," he said. "They're trying to stabilize housing prices. Buyers in the market ultimately is what will stabilize the prices. From that side I can see why they're doing it."

Pearson said he's a believer in "the law of unintended consequences." He called the current situation unprecedented, which will result in consequences, "some good, some bad."

At Gesa Credit Union, 52 percent of current mortgage applications are refinances, said Christina C. Brown, president and CEO.

She's a little nervous about mortgage interest rates staying low over a long period of time.

"If mortgage rates stay low for an extended period of time, it will inevitably put downward pressure on deposit rates," she said.

One potentially positive outcome is that homeowners will end up with more money in their pockets.

"Lower rates mean lower payments, which means more discretionary spending," Mitchell said. "On the other end, somebody's got to pay for it."

Manthei explained that the difference between an interest rate of 6.5 percent vs. 5 percent is substantial for homebuyers.

For example, a buyer who gets a 30-year fixed-rate mortgage loan of $100,000 at a 6.5 percent interest rate would pay a similar amount of principal and interest as a $117,000 house at a 5 percent interest rate.

December's shaping up to be a record one for Arboretum, Manthei said. And he anticipates new mortgage applications will pick up at the start of the new year as more buyers realize the savings associated with lower rates.

Making the choice to refinance depends on several factors, such as the loan type, amount and interest rate, as well as how long homeowners intend to stay in the house, Pearson said.

He anticipates rates will stay low for at least three to six months.

And with a local housing market that hasn't softened the way many have nationwide, some say it's a good time to buy.

"It's a double benefit for us," Pearson said.

tool name

Saturday, Dec. 06, 2008

Tri-City mortgagers see uptick in lending

By Ingrid Stegemoeller, Herald staff writer