Refis out, resale loans in

There is a sea change occurring in lending circles in the Denver-area and across the U.S., as banks and mortgage bankers increasingly shift to making loans for home purchases, as opposed to refinancing existing loans.

Part of it is due to a recent rise in mortgage rates, which while still unbelievably low by historical standards, are off their record lows.

Rates rising almost a full percentage point in recent weeks to more than 4 percent has hurt the ability of a consumer to buy a home a bit, said Peter Lansing, president of Universal Lending.

For example, a person who could have qualified for a $200,000 mortgage when rates were at an all-time low, could now quality for a $191,400 loan, he said.

“So there is maybe a $8,600 difference in housing cost,” Lansing said.

Lansing recently attended the Mortgage Banker Association’s Chairman’s Conference  for top lenders across the country, and he said most of the speakers from Washington, D.C. expect rates to rise to about 4.5 percent “pretty much through 2014.”

Part of the expected increase is at some point the government is expected to slow or stop its monthly bond buying, which has kept interest rates low, as unemployment falls and the economy improves.

“The real impact, though, has to do with the refinance market,” Lansing said. “The refinance market is slowing.”

It is not just because interest rates have been rising, either.

Rates fell so low that some homeowners have already refinanced two or three times and have no need to do so again, he said.

“There is the bell curve,” Lansing said. “A lot of people who could qualify to refinance already have taken advantage of these really low interest rates. You can’t refinance people indefinitely. We’re kind of running out of people to refinance.”

A recent report of the top 50 lenders in the Denver metro area by Land Title Guarantee Co., found that some lenders in April, the most recent numbers available, were still heavily weighted toward refinancing.

Wells Fargo Bank, the biggest lender in the metro area, made 1,574 mortgage loan almost $1.2 billion in April. Of those 218, or 13.8 percent, were for resale purchases, while 1,069, or 67.9 percent, were for refinances. A handful of loans were made for new homes and land.

Other big lenders also were heavily weighted toward refinancing.

At J.P. Morgan Chase Bank, only 10.1 percent of the loans were for reales; at Bank of America, 6.3 percent; US Bank, 6.6 percent; and Quicken Loan, 7.1 percent.

By contrast, at Universal Lending, 65.7 percent of its loans were for resale purchases. Other large, locally owned mortgage bankers showed similar trends. At Megastar Financial Corp., 51 percent of its loans were for resale purchases and at Pinnacle Mortgage Group, 80 percent of its loans were for resales.

Part of the reason that Wells Fargo was making so many refinances as compared to purchases is because of its size and the services it offers, said Tony Julianelle, an area sales manager for Wells Fargo.

“When you look at the top 50 report from Land Title, there are very few national who service their own loans,” Julianelle said.