Magazine article American Banker

Mortgage Business Perks Up as Rates Ease

Magazine article American Banker

Mortgage Business Perks Up as Rates Ease

Article excerpt

After a sluggish six months, mortgage lending appears poised to rebound in the second half.

Interest rates on 30-year mortgages are at their lowest level since February, giving a boost to home purchases and refinancings, observers said.

"This is certainly a better environment now than four months ago. Mortgage rates are down, and sales are up for both existing and new homes," said David Lereah, chief economist for the Mortgage Bankers Association of America.

Mr. Lereah said second-quarter economic data convinced him that his estimate for 1997 mortgage originations-$750 billion-is too low. He is in the process of raising it.

Two major lenders-Countrywide Credit Industries Inc. and North American Mortgage Co.-said they were already reaping the rewards of a livelier market in June.

Countrywide, based in Calabasas, Calif., said its loan production climbed 5% in June, to $3.33 billion, the first year-over-year gain in 1997. And its pipeline of loans in process-a measure of mortgages that are likely to close in coming months-grew 13%, to $5.26 billion.

Meanwhile, North American, of Santa Rosa, Calif., reported that June production rose 9%, to $839 million, and applications were up 18%.

Low interest rates are the main reason for the pickup in mortgage activity, observers said.

Rates on 30-year loans-which started the year at 7.67%, dipped to 7.56% in late February, then jumped to 8.16% in mid-April-had settled down to 7.58% at the end of June, according to Freddie Mac. And some analysts think rates could head lower, citing the Federal Open Market Committee's decision last week to hold rates steady as evidence that inflation is in check.

Some borrowers are seizing the opportunity to trade in higher-rate loans. "This is an environment where you start to think about refinancing," said Kenneth A. …

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