A little yellow sign in Tom Conley's office at Atlantic Home Mortgage has taken on special meaning for him lately. "No good deed ever goes unpunished," it says.
Like other mortgage lenders, Mr. Conley is swamped with applications to refinance home mortgages. And like other lenders, he's resolved to put a limit on how much the office seeks to handle.
Taking every application that comes in the door might seem like a good deed. But if Atlantic proves unable to cope with the workload, customers will eventually go away mad, says Mr. Conley, branch manager of Atlantic's Pasadena office.
Maryland lenders are starting to say "no" to refinance applicants who have good credit histories and stable jobs. Lenders have learned from the surge in refinancings that occurred in 1986 that it's better to limit business than to take more than they can complete on a timely basis.
"If you take more business than you can handle, you just hurt yourself," Mr. Conley says. Although Atlantic Home Mortgage, a mortgage banking firm, has yet to refuse any business, he insists "it could happen real fast."
With interest rates on mortgages at their lowest level in a decade and a half, demand from refinance applicants has picked up dramatically since the Christmas holiday, lenders say. That means heavier workloads for everyone connected to the mortgage-making process -- including loan processors and those who prepare credit reports or appraisals.
But a lender who promises more than he can deliver could lose the good will of customers. "We're a consumer-driven business, and we have to be very careful about customer service," says Michael Farrell, a vice president of the Washington-based Mortgage Bankers Association.
Mortgage lenders have other worries, too. For example, if they promise to lock in a customer's mortgage rate for 60 days, they are generally obligated to close the loan within that period -- assuming reasonable cooperation from the applicant. And if they're unable to meet the deadline and rates rise, they may be forced to honor the lower rate anyway, even though it costs them money to do so.
Lenders and state regulators became acutely aware of the lock-in issue during the 1986 refinancing surge, Mr. Conley says. "Even dumb people learned then the lesson in 1986 -- that it's not business if you take an application. It's only business if you settle it."
To curb business, lenders are favoring mortgages brought to them by realty agents, says Wynne Boone, branch manager of the Owings Mills office of CTX Mortgage Corp. "Realtors give lenders the main portion of their business," Ms. Boone says.
While a homeowner refinancing a loan is a one-shot deal, realty agents who recommend a particular lender can bring that lender an on-going stream of business over a period of years.