Saturday, October 1, 2011
WALLA WALLA - If mortgages were cable television, the deluxe package would be hard to resist right now. The promise of every channel at a quarter off the regular cost would likely have consumers lined up in droves to sign up, upgrade or keep what they have and pocket the savings.
So it's been a puzzler to local lenders why more people aren't taking them up on virtually the same offer for the lowest mortgage interest rates in history.
Business is up since the rates began plummeting, lenders say. But not as much as they would have expected - or even as much as business was when rates were at least a percentage point more than they are now. And most of the traffic has been generated directly by lenders contacting existing clients, they say.
Tim Applebee, branch manager of The Home Loan Center, wondered for a while if consumers were even aware of the low rates, which lending giant Freddie Mac said dropped last week to 4.01 percent on an average 30-year fixed mortgage and 3.28 percent on an average 15-year fixed mortgage.
So Applebee enlisted help from "The Loan Arranger," a caped and masked man waving a sign meant to attract people into the lending office, 1 E. Main St., with the possibility of finding savings.
"Someone's literally been standing on the corner with signs," Applebee said.
The approach has helped, he believes. He figures lending activity at the office doubled over the last week. During that period, The Home Loan Center wrote an estimated 30 loans, which is more typical of the monthly average, Applebee said.
But it's still relatively quiet considering previous periods with historically low rates.
"We've seen refinance booms in the past where it was hard to keep up with the volumes," added Wells Fargo Home Mortgage consultant Stacy Bergevin. That's not been so this time around, he said.
He figures loan applications at the Walla Walla office, 206 N. Second Ave., have tripled in number compared to before the rates dropped.
So what's keeping people from refinancing?
Bergevin said it could be that many people who already refinanced at 5 percent or more don't realize today's rates range from 2.5 percent to 4.5 percent, depending on the product and term.
Lenders believe they are also wrestling with consumer fears about the economy, employment stability and housing affordability at a time when many also perceive mortgage loans are harder to obtain. But for the sake of monthly - and long-term savings - on what is arguably the largest expense for consumers, lenders say the new rates are worth a look.
There are fewer options for those with credit issues, Bergevin acknowledged. That's especially true for those with a credit rating below 600, he said. There are also fewer zero-down options available. Most require at least 3.5 percent to 5 percent as a down payment. But there are also a number of programs available to assist in refinancing. Among them are free-refinance programs and programs that allow eligible borrowers to refinance without an appraisal, even if their value has likely decreased.
"The biggest difference is the amount of documentation that is required with mortgage lending today," Bergevin said. "Stated income loans are a thing of the past. When applying for a mortgage be prepared to document almost everything regarding income, assets and debts."
Consumers may also be discouraged from refinancing because of another problem: decreasing home values. Some may no longer have equity or are upside down on their homes, Applebee said. Several years ago houses seemed like virtual cash machines, that could be easily bought and turned over for a quick profit. Now it's more likely that the amount owed closely matches the actual appraisal value, Applebee said.
According to an Associated Press report, the low interest rates have not resulted in a boost nationally for home sales or refinancing. The lack of cash and equity has made it difficult for many to get a new loan. Consequently, this year could be among the worst for sales of previously occupied homes in 14 years, the AP said.
The drop in mortgage rates, however, could help bolster the economy if more people could refinance, pay less interest on their loans and have more money to spend.
The majority of those who have inquired have been rewarded, Applebee said. He estimates 90 percent of those who have visited the office have successfully refinanced. The average savings, he said, is about $256 per month. More people could benefit, he believes.
"We may never see this again," Applebee said. "It's not a hard sell."
Vicki Hillhouse can be reached at email@example.com or 526-8321.