LOs Are Happily Swamped with Refi Apps

Mortgage & Real Estate

Vacations are being delayed, parents are arriving late to graduation ceremonies and loan officers are constantly checking their BlackBerrys, which can only mean one thing: It’s spring and mortgage rates have tanked once again, spurring loan applications to spiral upward.

Never mind that probably less than half of these mortgages will ever close—especially in today’s ultra-tight underwriting market—but new business is definitely on the rise and loan officers, their processors and underwriters are overwhelmed as June morphs into July.

Moreover, volumes may pick up even more (even if rates rise) because the FHA will launch a much-anticipated new streamline refi program early this week. “My phones have been going nuts,” said one loan officer who works for Bank of America.

This LO, who didn’t want to be identified because the bank frowns upon rank-and-file staff talking to the media, added, “I’m getting leads from the bank branches, real estate agents and websites.”

And as most any mortgage LO can tell you, it’s no secret where most of the avalanche of applications is coming from: refinancings as opposed to purchase money loans.

“Our volumes are going great guns,” said Brian Simon, CEO of Caliber Funding. “We’re doing ten-times the volume we were doing a year ago.”

The privately held Caliber is on track to originate $450 million in June alone compared to $300 million and $350 million in April and May, respectively.

Business has picked up so much that Caliber is contemplating bringing on one or two LO groups from other lenders. “We might bring on 20 to 30 LOs at a shot,” he said.

Michael Foote, who manages a small brokerage shop in Irvine, Calif., called Mortgages Made Simple Inc., said, “Everyone is slammed right now. People are calling back who I spoke two, three, four months ago. Maybe it’s an overreaction but we’re really busy.”

Foote says most of his volume, predictably, is tied to refis. “Right now about 90% of what we’re seeing is refis.”

Even though the California housing market has been hard hit by the recession, he said there’s evidence that affordable homes (less than $500,000) in price are becoming scarce. “Once again we’re starting to see multiple offers on homes,” he said.

One firm that is happily seeing more purchase money loans than refis is Prosperity Mortgage, which is based in the Washington area, home to one of the healthiest housing markets in the nation.

Jeff Detwiler, president of realty giant Long Foster which controls Prosperity, said the mortgage division’s loan pipeline is “on fire” right now—with purchase money loans. “We took in 156 new applications [last] Monday alone,” he said. “That’s the highest amount we’ve ever taken in.” In May Prosperity received 570 new applications.

Roughly 40% of the firm’s volume is purchase money loans, which makes sense since it has ownership ties to one of the largest realty firms in the mid-Atlantic. Long Foster boasts 170 branches in seven states. Typically, LOs from Prosperity sit in the LF branches.

Detwiler also worries about supply problems when it comes to home inventory. “Right now we’re at multiyear lows on inventory,” he told National Mortgage News. “We’re seeing properties sell in a week.”

Prosperity’s biggest challenge? That’s an easy question to answer, said Detwiler. “It’s loan underwriting standards. The credit standards have swung much too far the other way.”

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