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ARCHIVED  July 2, 1999

Mortgage lenders keep pace with hungry market

Mortgage lenders along the Northern Front Range continue to post record-breaking numbers, with strong lending activity, both for new purchases and refinances.

“It’s been a phenomenal year,´ said Connie Begger, branch manger for First Colorado Mortgage Corp. “We had great purchase of business and a lot of refinance business. The refinance market is pretty dependent on interest rates, and they hit some all-time highs.”

Although First Colorado Mortgage was among the region’s top lenders in 1998 with more than $346 million in loans (only Norwest Mortgage Inc. recorded more), the success story in 1998 belonged to the mortgage-lending industry as a whole. Almost any one of the 150-plus mortgage lenders in Northern Colorado might have declared, as Begger did: “It’s too bad every year can’t be like 1998.”

Interest rates for mortgage loans dipped down to record lows in 1998, providing opportunities for first-time homebuyers and for previous borrowers looking to refinance. With few exceptions, lenders in Northern Colorado increased their volume of loans significantly from 1997 to 1998. The 21 companies that reported numbers for both 1997 and 1998 on The Northern Colorado Business Report’s list of Largest Mortgage Lenders, improved their total volume of loans by an average of 69 percent over the two years.

“The majority of the increase had to do with the historically low interest rates in 1998 driven by a huge refinance wave,´ said Rick Scanlan, area manager for Norwest Mortgage.

“Low, low rates and refinance business being a boon were a huge part of it, but our staff was also determined to be aggressive in the market, and it paid off,´ said Carolyn Dirscherl, manager of Union Colony Bank, which nearly tripled its total loan volume from 1997 to 1998.

First National Bank of Longmont, a bank with more than 100 years of business experience in Northern Colorado, added mortgage lending to its services when it purchased Longmont-based Hahn Mortgage in December 1997.

“We felt it was important to have someone who knew the local market,´ said Richard Salberg, president of First National Bank of Longmont. “The merger was very good for both of us. It helped [Duane Hahn, owner of Hahn Mortgage] to be associated with us and use our capital to get some new products he wanted, and it helped us get services we wanted to provide to our customers.”

Most mortgage providers profit from a one-time origination fee charged to the customer and then sell their loans to either a government-sponsored entity, such as Fannie Mae or Freddie Mac, or a government agency, such as the Federal Housing Administration or Veterans Affairs. Few mortgage lenders can afford to pay out loans from their own assets and so must be certain that the loans they make are eligible for sale on the open market.

To provide flexibility to their customers, mortgage lenders must keep careful stock of the types of loans they can sell, and for this reason, companies that focus entirely on mortgage lending tend to have an advantage over institutions with more-diversified financial services, Salberg explained.

“We looked at the costs for setting up a new company and felt that most of the territories had already been staked out by other [mortgage-banking] companies. The merger was a plus for us that enabled us to stay in the market where we wanted to be,” Salberg added. “Overall, we’re very pleased that we made the investment.”

The market for resalable loans has been further complicated of late with the increasing level of competition between Fannie Mae and the Federal Housing Administration.

“Fannie Mae has made a move into the FHA’s traditional market, and the FHA in turn has increased its loan limits in Larimer County to try to get more customers,” Begger said. “Anytime you get with government agencies or quasi-government agencies, they’re hard to predict.”

“Freddie Mac and Fannie Mae are becoming more aggressive in their underwriting criteria,” Scanlan agreed. “The FHA has been increasing its loan limits so more people can qualify.”

In 1998, Norwest Mortgage, both in Northern Colorado and in the rest of the country, had its most successful year ever, Scanlan said. “And not only in number of loans 9 our customer service ratings were higher than they have ever been. That is a message to us that we need to be continually focused on customers. If we take care of our customers, we are going to continue to do well.”

Perhaps, but the rock-bottom interest rates that kept mortgage lenders so busy in Northern Colorado and the rest of the nation in 1998 are showing signs of turning around.

Freddie Mac’s recently released Primary Mortgage Market Survey indicated that as of June 11, 1999, the national average interest rate for the 30-year fixed-rate mortgage was 7.51 percent, up from last year’s average of 7.04 percent.

“Last Friday’s employment report showed unemployment down to a generational low of 4.2 percent, spurring concerns that the economy continues to grow too strongly,” Frank Nothaft, deputy chief economist for Freddie Mac, said in a prepared statement. “This, in turn raises fears of inflation and that makes interest rates move up.”

Scanlan was less convinced of the causes of rate fluctuation. “If you had asked me a year ago if the rates would go as low as they did, I would have said no, and a few months ago, if you’d asked me if they’d go up, I would have said with the same assurance that they would not be as high,” he said. “Rates are determined by a myriad of events.”

While Freddie Mac’s Primary Mortgage Market Survey did indicate increasing rates throughout the United States, average rates in the southwest region, including Colorado and Wyoming, were among the lowest for both fixed-rate and one-year adjustable-rate mortgages.

Scanlan added: “One thing that is in place in Northern Colorado is a tremendously competitive environment that keeps rates and costs down. There’s more growth in the Southwest than anywhere else in the country, and it’s working to the advantage of the homebuyers.”

“It’s still strong, and I think it will stay that way for a while,” Dirscherl said, referring to the health of the market for loans in Northern Colorado. “I don’t know if it will get back to where it was with the refinancing last fall, and in the longer future, there’s going to have to be changes, but for now, it continues to be strong.”

“Mortgage banking is changing, and again I think it will work to our customers’ betterment,” Scanlan concluded. “The mortgage providers are going to evolve into more of a financial-services industry rather than just straight mortgage. It’s going to continue to evolve as we move into the year 2000 and beyond, and I think it’s going to be very exciting for customers.”

Mortgage lenders along the Northern Front Range continue to post record-breaking numbers, with strong lending activity, both for new purchases and refinances.

“It’s been a phenomenal year,´ said Connie Begger, branch manger for First Colorado Mortgage Corp. “We had great purchase of business and a lot of refinance business. The refinance market is pretty dependent on interest rates, and they hit some all-time highs.”

Although First Colorado Mortgage was among the region’s top lenders in 1998 with more than $346 million in loans (only Norwest Mortgage Inc. recorded more), the success story in 1998 belonged to the mortgage-lending industry as a…

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