Even as recession clouds hover over the nation's economy, there may be a silver lining for area homeowners or would-be-buyers: Mortgage rates are dropping.
The weekly mortgage rate roundup conducted by The Sun (see Mortgage Rate Chart on Page 4D) found that two area lenders -- the Bank of Annapolis and Annapolis Federal Savings & Loan Association -- have set their rates lower than all their competitors.
Although rates may change daily, according to Bank of Annapolis Chief Executive Officer John W. Marhefka Jr., "They've been dropping like the proverbial rock lately."
Both lenders are marketing 15-year mortgages at 8.75 percent with a 5 percent down payment. Bank of Annapolis assesses 3.5 points with its loan while Annapolis Federal requires 4 points. A point equals 1 percent of the loan principal.
According to officials at these institutions, as lenders they act as "middlemen" in the mortgage business. They pay out the loan money to borrowers and then the institution sells the loan to large investors such as the large national banks or mortgage companies.
Encouraged by Federal Reserve Bank moves to lower interest rates, these large investors in turn authorize lower mortgage rates for their mortgage-writing business partners.
"Like everyone else, we price our loans based upon the ultimate resale of the loan," says Mr. Marhefka.
That means aggressive homeowners can jump on lower rates t refinance an existing mortgage or new homebuyers can enjoy better deals.
It's a win-win situation for the banks and homebuyers.
Annapolis Federal, like Bank of Annapolis, has seen the flow of new and refinanced mortgages increase with the drop in interest rates, according to David R. Chisholm, vice president in charge of the mortgage lending division.