Maryland mortgage lenders didn't expect a second wave of refinancing applications crashing upon them this year. They thought nearly all the demand for low, single-digit rates had been satisfied in January. But they were wrong.
"The phone activity has been very strong. We're getting 30 calls a day vs. the usual 10," said Steven Marshall, who heads the Severna Park office of PaineWebber Mortgage Finance, an East Coast lender based in Columbia.
"The ripples are definitely coming through," said Mr. Marshall, noting that the demand for refinancing has been unusually strong since the Federal Reserve lowered its discount rate July 2, sending mortgage rates to their lowest level in nearly two decades.
As in January, rates on many 30-year, fixed-rate loans have fallen below 8 percent.
"We were happily surprised," said Douglas Perry, vice president of production at Countrywide Funding, which lends in Baltimore and nationwide.
Another Maryland lender, Harvey Gruntman, sales manager for Sequoia Mortgage Corp. in Pikesville, said much of the interest was coming from those who missed the refinancing boat in January, when the last big surge occurred.
The mistake many people made early this year was to shop so long for the lowest possible rate that they failed to refinance before the rates rose again in the spring, Mr. Gruntman said.
"To save a nickel, they lost thousands," he said of the indecisive homeowners.
Most area lenders have yet to shut their loan windows as they did in the first quarter when demand exceeded their capacity to handle it, but they are beginning to use other, more limited measures to constrain demand.
Sequoia, for instance, is taking few loan applications for mortgages under $100,000, since the profit on larger loans is greater, Mr. Gruntman said.
Local lenders also are troubled by borrowers' tendency to take out multiple refinancing applications with the idea of sticking with the lender that winds up with the lowest rate and dropping the others.
To discourage multiple applications, some lenders have begun imposing "lock-in fees" that are refundable at settlement.
"It's not easy for the lender to deal with these multiple applications," said Buddy Koolhof, branch manager for the Owings Mills office of NVR Mortgage, which is imposing a lock-in fee.
But Paul Havemann, a vice president with HSH Associates, a New Jersey firm that tracks mortgage rates for consumers in Baltimore and elsewhere, said lenders would be "foolish" to scare away borrowers by erecting such barriers this time around.
"They're expecting people to come in the doors and windows like they did last January," Mr. Havemann said.
"But they're going to be mistaken. There just aren't as many people out there in the market to refinance as there were early this year."