Mortgage News

Mortgage refinancing frenzy stills

Layoffs begin at loan brokerages and related businesses as demand for lower interest rates falls off

02/17/04

The home refinancing craze, credited with propping up an anemic local and national economy through an otherwise recessionary two years, has quieted to a whisper, say mortgage specialists and bankers in Portland's suburbs.

As a result, mortgage companies, no longer besieged by homeowners wanting to take advantage of historically low interest rates, have laid off scores of loan processors in the past few months.

From Lake Oswego's Kruse Way -- the metro area's mortgage powerhouse -- to Tigard and Tualatin, mortgage brokers are furiously retooling to tap what they still view as a good-sized pool of refinancing prospects who, for one reason or another, haven't gotten around to saving themselves potentially hundreds of dollars a month in mortgage payments.

"It's not dead," said Larry Morris, a mortgage consultant with Community Mortgage in Lake Oswego. "But it's certainly not as vibrant as it was last summer."

The drop in new refinance applications -- off by 60 percent or more, according to some local experts -- comes despite mortgage rates that are still lower than one year ago at this time.

The average rate on 30-year mortgages slipped last weekto 5.66 percent from 5.72 percent, according to Freddie Mac, the national mortgage giant. A year ago, rates on 30-year mortgages averaged 5.86 percent.

As recently as June 2002, the average 30-year rate hovered around 7.25 percent. Current rates are considered among the lowest ever . Rates in the early 1980s, by contrast, hit 15 percent and above.

For more than a year, the rush of homeowners looking to refinance had mortgage offices throughout the area beefing up staffs to keep pace.

Some of those employees did nothing but field calls and help fill out forms, often during work hours extended into evenings and weekends. Others were charged with sending out mailers soliciting new applications.

"It was a feeding frenzy," said Todd Montgomery, president of Montgomery Mortgage in West Linn. "There really aren't any words to describe it. A lot of people in the business were so besieged that they just got burned out from all the stress."

Jesse Arthur, president and co-owner of Wilsonville's Oregon Home Mortgage, agreed.

"For a while there," he said, "it was just a matter of how many calls we could take determining how many loans we could do."

Now, like a gold-mining town that's been tapped out, the furor has quieted to a low-pitched hum.

Northwest banking giant Washington Mutual, for instance, announced recently that it was eliminating 200 loan processing jobs -- most of the loan processing jobs -- in its Kruse Way office alone. Industry sources said many of those employees will be offered other positions within the company, but they may have to move to Bellevue, Wash., or Northern California.

"Almost all of the processing centers for big firms have cut back," said Todd Williams, president of Evergreen Mortgage in Lake Oswego, the state's second-oldest mortgage brokerage. "They've let go all of their temps and laid off some hourly people. Large escrow firms are doing the same thing."

That downsizing reflects a national trend, according to the Mortgage Bankers Association. The Washington, D.C.-based organization estimates that jobs in the refinance industry will shrink by nearly 20 percent this year and that nearly 25 percent of the 28,000 refinance jobs nationwide could be gone by the end of 2005.

"More than anything now, loan officers are having to work smarter," said Community Mortgage's Morris. "The business is still out there, but it's not merely a matter of placing an ad in the paper anymore and getting 20 people to respond."

In Morris' view, 40 percent of the people who could benefit from refinancing their mortgages have done so in the past year or so. The remainder, representing the market he still hopes to reach, either are intimidated by what they perceive as a complicated process or simply too busy to attempt the effort.

"I don't want to call those folks lazy," said West Linn's Montgomery. "But it's obviously not important enough for them to make a phone call or two to find out what they could do."

Tom Jacobs, who heads Edge Financial in Tigard, said the number of traditional mortgage refinances he's doing has dropped off considerably. But there's still plenty of business for companies willing to be creative and diverse, he said.

"It's a niche ballgame," Jacobs said. "We're doing credit-line loans, FHA loans, a lot of things that other people aren't. It's really a matter of finding opportunities and taking them."

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