Brokers relish extended boom in the home mortgage market

Maryland professionals discuss low rates, reforms

March 21, 2004|By Tracy Swartz | Tracy Swartz,SUN STAFF

When John Osipchak became a mortgage broker a few months ago, he was expecting a barrage of phone calls from people looking to tap into the low mortgage rates.

A real estate appraiser for seven years, Osipchak joined the business after watching his broker clients earn similar amounts - about $130,000 a year - and work fewer hours. He was expecting the highs he had seen his clients enjoy, but Osipchak started his career during winter's lull, when mortgage rates were slowly rising and home sales and refinancings were tapering off after three consecutive record years.

"I'm not disappointed," said Osipchak, president of Bull Run Mortgage Inc. in Springfield, Va. "We weren't starting out in the best market."

But things have turned since he started. Mortgage rates dropped to near-record lows last week, ensuring that the boom will continue at least for a little while.

Nearly 1,200 mortgage professionals gathered last week in Baltimore at a conference of the Maryland Association of Mortgage Brokers to discuss the low rates, review new products and services and attend seminars on possible mortgage reforms.

The average national rate on a benchmark 30-year-fixed mortgage dropped to 5.38 percent on Thursday, the lowest since June, according to Freddie Mac. The average was more than 5.79 percent a year ago and 8 percent four years ago.

"It's been a real whirlwind couple of years for brokers," said Diane B. Cook, president of Metropolitan Mortgage Services in Washington. "We're tired."

As rates continue to drop, more people are becoming mortgage brokers. There were 44,000 brokerages in 2002, more than quadruple the number in 1987, according to Wholesale Access, a Columbia-based mortgage research company. There were 829 Maryland brokerage firms in 2002, up from 337 in 1991.

Mortgage brokers accounted for 65 percent of residential mortgage activity in 2002, earning $1.69 trillion collectively, Wholesale Access reported.

"Since the '90s, there has been a continual staircase in terms of their market share and their numbers," said Tom LaMalfa, Wholesale Access' managing director.

LaMalfa said mortgage bankers accounted for the largest share of the remaining 35 percent of mortgage activity. Brokers serve as middlemen between borrowers and lenders, shopping for the best loan. Bankers lend their institutions' money.

Brokers earn about 1.7 percent of the loan amount, up from 1.3 percent to 1.4 percent in years when rates are more moderate, LaMalfa said.

With rates low this year, LaMalfa said, the nation appears to be on the throes of another refinancing boom. The last boom, from 2001 through much of last year, was the longest.

Refinancing is on the rise again, a survey by the Mortgage Bankers Association shows. The group reported that refinancing was 40 percent higher in the week ending March 12 than in the previous week.

Mark Fisher refinanced the mortgage on his single-family home in Eldersburg last year, then refinanced again a few weeks ago to 4.75 percent on an adjustable-rate mortgage. Fisher wanted to cash out for home improvements and to consolidate debt. Fisher estimates he will pay more than $400 a month less than he did on his original mortgage.

"The opportunity presented itself, and we made what we thought was a pretty good deal," said Fisher, 34, regional manager for a real estate firm. "It's very, very easy to do the refinance. It's not like there's a lot of paperwork to get into the program."

Brokers could see changes in the closing process for home mortgages as federal officials look to overhaul the Real Estate Settlement Procedures Act, which was enacted 30 years ago to regulate mortgage disclosures and settlement costs.

The government says the purpose of its proposed reform is to streamline the process and reduce settlement costs.

However, the proposal has prompted concern from some mortgage professionals, who say the new rule would reduce competition.

The U.S. Department of Housing and Urban Development submitted its final version of a reform plan to the Office of Management and Budget in December. The OMB isn't expected to reveal the specifics of the plan until the middle of next month, a month's delay in the original release date.

"Hopefully, it will get us all on a level playing field," said John Garofalo, president of Metropolitan Mortgage Bankers Inc. in Silver Spring. "I'd like to see clarification, and I'd like to see resolution."

MAMB election and awards

The Maryland Association of Mortgage Brokers elected a president and recognized five industry leaders at a banquet last week.

Ralph Dawson of RAM Financial in Largo was elected group president for 2004-2005. Dawson also received the legislative award for his work on behalf of the group in Annapolis.

John Garofalo, president of Metropolitan Mortgage Bankers Inc. in Silver Spring, and Joseph M. Brown Jr. of Premier Equity Mortgage in Randallstown were chosen brokers of the year.

Traci Snyder and Thomas C. Shaner of the Joseph E. Shaner Co. were presented with the president's award.

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