Mortgage industry booms with sales, refinances

Staff at Penn Suburban Abstract have moved to a six- day work week to try to keep up with the surge in demand for mortgage closings, and the office hasn’t found it easy to hire more workers. Other title companies are hiring, too.

“We are completely swamped,” said Rich Milesky, president of the Hampton title company.

The mortgage industry was hot even before the COVID- 19 pandemic hit in March. But in recent months, homeowners have been in a mad rush to refinance their mortgages for lower monthly payments, and the home- purchasing market has boomed as rates keep hitting one record low after another.

Mortgage rates fell below 3% for the first time in July. The current rate for a 30- year fixed rate mortgage stands at 3.14%. The rate for a 15- year fixed mortgage is 2.55%, according to Bankrate. com.

When he can look up from handling the next account, Mr. Milesky fears what is happening now in the mortgage market may slam the brakes on real estate activity when the economy normalizes again.

“When mortgage rates move up to 4% or higher, nobody will want to move and trade their low rate mortgage for a higher one,” he said. “People will remodel their homes instead. The only buyers will be first- time buyers and transfers.

“We are not likely to see another refinancing frenzy like this again in our lifetime.”

Despite the nation being under pandemic- related lockdowns for much of the second quarter, the mortgage market saw record- breaking levels of activity between April and June, according to a report released Tuesday by Jacksonville, Fla.- based mortgage data firm Black Knight Inc.

Lenders in the second quarter issued $ 1.1 trillion in home loans — the largest quarterly origination volume on record since the company began tracking the data in 2000. In all of 2019, a total of $ 2.06 trillion in home loans were originated, according to the Washington, D.C.based Mortgage Bankers Association.

Low interest rates pushed refinancing activity up by more than 60% compared to the

previous quarter and 200% higher than in the second quarter of 2019.

Rate locks currently in place — guarantees to mortgageloan borrowers their interest rate won’t change before closing — suggest third- quarter purchase lending could break seasonal trends and increase by 30% to 40%, which would be a record high.

These are the best of times for the mortgage industry. Independent mortgage banks reported a net gain of $ 4,548 on each loan they originated in the second quarter of 2020, up from a reported gain of $ 1,600 per loan in the first quarter of 2020, according to the Mortgage Bankers Association.

“Fueled by a surge in borrower demand and recordlow mortgage rates, mortgage production profits in the second quarter reached the highest level since the inception of MBA’s report in 2008,” said Marina Walsh, the association’s vice president of industry analysis.

For a while in mid- August, it looked as though the refinancing fever might experience a chilling effect when government- controlled mortgage financiers Fannie Mae and Freddie Mac announced a new 0.5% fee would be tacked onto new refinances — making it more expensive for homeowners to refinance — starting Sept. 1.

That would have amounted to an additional $ 1,000 fee on a $ 200,000 refinance.

But the Federal Housing Finance Agency directed Fannie Mae and Freddie Mac to hold off on implementing the fee until Dec. 1 — at which time the 0.5% fee will be imposed on both cash- out and no cashout refinance mortgages sold to the two governmentsponsored enterprises. It will not affect purchase mortgages.

The new guidance also stipulated Fannie and Freddie will exempt refinance loans with balances below $ 125,000.

Fannie Mae and Freddie Mac do not originate loans. Instead, they purchase and guarantee loans on the secondary market.

The mortgage business has been so robust Mr. Milesky said it’s hard to tell if the planned fee increase — and its postponement — has had any impact on borrowers.

Patty Handlovitch, a senior loan officer at RedTree Mortgage in Robinson, said the mortgage industry is currently in a bottleneck due to the crush of applications title companies and banks are trying to process. She said mortgage- loan applicants might experience longer wait times than usual.

“Title companies have to do the same amount of work if it’s a purchase mortgage or a refinance,” she said. “Bank underwriters are the same. We have been busy trying to keep up with the pace. The amount of time it takes for underwriters to look at loans and give a thumbs up or down is really backed up.”

Mr. Milesky is pretty certain after 23 years in the mortgage business, he will likely be retired before mortgages see another boom like this one.

“Rates would have to go up to about 5% or 6% and stay there for a number of years so that you have a lot of people buying at those rates,” he said.

“Then, there would have to be an economic tragedy for rates to go back to 3% to see a refinancing boom. That’s going to be a long time from now.”

Ms. Handlovitch has a more rosy view of the future of real estate transactions as rates begin to rise.

“Nobody knows what rates will be in the future,” she said. “We don’t know when they will go up or how much they will go up.

“But I do know people will still want houses. People will always want bigger, better and more. Families expand their housing as they grow and downsize as they shrink. You’ll never see a trend of people staying put forever.”