Boom in refinancing fails to materialize


It's the mortgage refinance boomlet that didn't happen -- at least not yet.

Mortgage rates have been falling for the past two weeks, but Baltimore-area homeowners aren't reporting to lenders' offices in the same numbers that they did when rates fell at least three other times during the early 1990s.

"There's been no earthquake -- not even an aftershock," says Keith Gumbinger, an analyst with HSH Associates, the New Jersey firm that tracks mortgage rates in the Baltimore area, as well as other markets.

As of Thursday, the national average rate for a 30-year fixed mortgage was 7.23, down about a quarter of a percentage point since late May, according to the Federal Home Loan Mortgage Corp.

"The number of random phone calls for 'Please-give-me-a-quote' has fallen off," said John Lloyd, branch manager for Sears Mortgage in Lutherville. If anything, the current mortgage rate picture has stimulated more interest in home purchases, he says.

For the local market generally, the curtain fell on mortgage refinancings about a month ago, local lenders report. It was by that point that most homeowners with the inclination, as well as the capability, to refinance had already done so, according to mortgage specialists.

Most recently, rates for 30-year fixed mortgages started falling from about 8.25 percent in November, hitting about 7.50 percent February. Rates had been steady until a few weeks ago.

"It's not like it was," says Kent Baklor, president of Bankers First Mortgage, a mortgage banking firm based in Owings Mills. "The majority of people have gotten the rates that are comfortable for them and there's no incentive to get involved again."

The first mortgage refinancing binge of the early 1990s began in November 1991 and continued through February 1992, Mr. Gumbinger said.

"That was the biggest of the booms. It had the most frenetic pace to it. People came out believing that rates would never be that low again," Mr. Gumbinger said. Homeowners rushed to refinance at rates that bottomed at 8.31 percent for 30-year fixed-rate money -- "rates that seem rather obscenely high by today's standards."

A lesser refinancing boom occurred in September 1992, when the average mortgage rate troughed at 7.89 percent, according to HSH records.

Slow economic growth and a diminished fear about inflation is behind the most recent fall in mortgage rates, which began in late June, mortgage specialists say.

"I think there's no inflation currently in the economy and, basically, if you were to take a snapshot of the economy a year ago and today, it would be the same," said Dan Segal, assistant vice president for Mortgage Capital Investors, a mortgage banking firm based in Rockville.

At current levels, mortgage rates are "absolutely, far and away, the lowest since the middle of 1972," Mr. Gumbinger says.

Some analysts predict the fall in rates will soon lead to another BTC wave of refinancings.

"It's a little early yet to know exactly what the response will be, but at these levels there is a new layer of home loans that become more likely to be refinanced," said Stanford L. Kurland, chief operating officer at Countrywide Funding Corporation, the nation's largest home lender.

Mr. Kurland declined to say what volume of loans Countrywide issued or was in the process of issuing during June. But he noted that financing activity appears to be strong enough that the mortgage industry could originate $1 trillion of loans this year, equaling the record volume of 1992.

In 1992, about 60 percent of mortgage loans were to take advantage of lower interest rates by refinancing existing homes. But so far there hasn't been a rush to mortgage bankers. Local mortgage specialists offer several explanations.

For one thing, many consumers are convinced that mortgage rates may continue to drift downward, encouraging them to take a wait-it-out attitude if they're planning a refinancing move, said Mr. Segal of Mortgage Capital Investors.

Fatigue is also a factor. For many who have already refinanced once -- or possibly twice -- since the opening of the 1990s, there's an unwillingness to go through the rigors of the process all over again -- even in those cases where refinancing may be financially justified, Mr. Segal said.

"They're tired of doing it," he says.

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