- The Washington Times - Tuesday, September 3, 2002

The lowest mortgage rates in 30 years are propelling homeowners to refinance, a trend that has picked up steam this summer. The average 30-year fixed-rate mortgage in the United States is 6.22 percent, according to a survey released Thursday by Freddie Mac, a government chartered company in McLean that helps finance one out of six houses in the nation.
It was the second time since Aug. 15 that mortgage rates dipped to 6.22 percent, the lowest level in 32 years.
During the final week of August 2001, 30-year mortgages averaged 6.92 percent, according to Freddie Mac.
"It's phenomenal," said Frank Nothaft, chief economist for Freddie Mac.
Refinancing accounts for 68.9 percent of all mortgage loans, according to the Mortgage Bankers Association of America. Last year, refinance deals were just 46.4 percent of the mortgage loan market.
Mortgage bankers say they have been swamped in the past year, but especially during the past three months. "We don't have to advertise. We aren't soliciting customers. They're seeking us out," said Tom Edmunds, senior vice president of mortgage production for Sandy Spring Mortgage, a Columbia, Md., company.
Most homeowners are refinancing to tap equity in their homes or to lower their mortgage payments, sometimes cutting them $100 or more a month.
"Both scenarios aid the economy. If you put an extra $100 in someone's pocket each month, that has the effect of a tax cut. If you're tapping the equity in your home to do home improvement or to purchase a new car, you're fueling economic activity," Mr. Nothaft said.
Ijamsville, Md., resident Carrie Sore and her husband, Gerardo, refinanced their 30-year mortgage for the second time in two years last week, primarily to lower their house payment.
The Sores took out a 30-year mortgage at 8.25 percent when they bought their house in 1999. The couple refinanced in January 2001, locking in a 7 percent rate. When they refinanced last week, they locked in a 6.37 percent rate and lowered their house payment by $210 a month.
"When we refinanced last year, I thought that was a good rate. I never expected them to go down even further," Mrs. Sore said.
The refinancing process has become quicker than it was during the last boom, during the late 1980s, because customers have become savvier, mortgage bankers say. Many homeowners are using the Internet to calculate their mortgage payments and to complete online applications for refinancing.
"We're seeing a much more informed customer now than we did in the 1980s. We are refinancing people who have refinanced before. They know the numbers. They know the routine. It's amazing how well-trained they are," Mr. Edmunds said.
An automated underwriting system introduced in recent years also has made the refinancing process quicker, mortgage bankers say.
"It has helped to reduce costs because people are not waiting nine months to refinance. We're handling record levels of refinancing without the bottlenecks we saw during the last boom," Mr. Nothaft said.
Not everyone has gotten the message, though.
"There is still a good segment of the public who are paying between 8 [percent] to 11 percent interest rates," said Karyn T. Wilson, a Frederick, Md., mortgage broker and chairman of the Mortgage Bankers Association of Metropolitan Washington, a trade group. She recalled one client who recently refinanced an 11 percent mortgage for the first time, slashing the homeowner's monthly house payment $800.
Some economists say this refinancing boom may not be as strong as previous ones because many people have lost jobs and can't meet income requirements to refinance.
"If you don't have a job, that creates a lot of problems for people who want to refinance," Mr. Nothaft said.
Mortgage rates are lowest in the West, where the average is 6.17 percent, according to Freddie Mac. They are highest in the Midwest, where the average rate is 6.34 percent.
In the Northeast, which includes Maryland, Virginia and the District of Columbia, the average rate is 6.24 percent.

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