Home refinancings not as numerous as expected with record low mortgage rate

12:00 AM CDT on Monday, July 5, 2010

By STEVE BROWN / The Dallas Morning News

With 30-year home loan rates near 4.5 percent, refinancing is back in fashion.

But local mortgage reps say they are not seeing the flood of business they anticipated.

"You would think that the refi business would be blowing and going with interest rates at 50-year lows," said Billy Parker of Old Capital Residential Lending. "We are seeing a little upswing but not the massive amount of refi borrowers that we would expect at these interest rate levels."

The nationwide cost of an average 30-year home loan was 4.58 percent last week, according to mortgage giant Freddie Mac, which tracks mortgage rates. That's the lowest such rate the mortgage company has reported since it started business in the early 1970s.

The fall in home finance costs comes at a time when "the economy struggles to gain momentum and inflation remains very low," said Freddie Mac economist Frank Nothaft.

So with inflation and interest rates expected to rise, why aren't homeowners rushing to take advantage?

"What we are seeing is that the pool of homeowners who are credit-worthy and have stable jobs have already refinanced," Parker said.

And some borrowers who would like to capitalize on the low mortgage rates can't because either they can't meet tougher underwriting standards or the values of their homes have declined.

"I have lost at least six refi loans this year due to [low] appraisals," Parker said.

Despite obstacles, more consumers across the country are trying to refinance. Nationwide home loan refinance applications were up more than 12 percent in the week ending June 25 to the highest level since early 2009, the Mortgage Bankers Association reports.

At the same time, home purchase mortgage applications were down to near 13-year lows.

But in North Texas, homebuyers now dominate the mortgage business, some lenders say.

"Right now, I'm seeing refis at about 25 percent to 30 percent of all applications," said Mark Raskin, a senior loan officer for PrimeLending. "Our purchase business in Texas has not slowed down at all.

"In fact, we are continuing to see an increase in purchase applications," Raskin said.

Many homeowners who have already locked into lower rates would have to see even further cuts before getting back into the loan market.

"Actually, our refi orders are down significantly versus the strong first six months of last year, when lots of folks took advantage of rates between 4.75 percent and 5 percent for 30-year fixed," said Britt Fair, chief operating officer at Hexter-Fair Title Co. "Most homeowners either don't qualify or already refinanced and don't want to incur the transaction costs for such a small rate improvement."

Fair said "substantially higher" numbers of higher-priced homeowners are refinancing. A year ago, the cost spread on these "jumbo" loans was much higher, he said.