Mortgage lending rates down following 2012 boom

Refinances accounted for a big share of business last year. Will home buying be the story for 2013?

Signing documents

Clark County’s top lenders issued thousands of more home loans in 2012 than they did a year earlier – apparently riding a wave of refinances that swept across the U.S. as existing homeowners sought to lock in low interest rates while they still could.

Institutions that reported details to the Vancouver Business Journal in both 2012 and 2011 closed 9,411 loans last year, up 89 percent from the previous year. But refis don’t tell the whole story of 2012, according to local lending experts asked to discuss the uptick. Many have been targeting Clark County borrowers aggressively. Acquisitions also played a role. And in the fast-changing world of finance, mortgage issuers say the numbers might look quite different if they included loan data for 2013.

HomeStreet Bank, in particular, stands out among Clark County lenders. It closed 2,158 loans in 2012 – a fivefold climb from 2011, enough to make it the top mortgage issuer in the county.

“We intentionally grew our presence in Clark County as part of an innovative hiring and office expansion strategy in the Northwest,” said Jeff Schaller, HomeStreet’s regional vice president for Southwest Washington and Portland.

That strategy included airing HomeStreet’s first-ever televised ads in the region, which began to air on Super Bowl Sunday last year, he said.

The company also sought to expand its Hometown Home Loan Program, which recruits employers to offer financing discounts to their workers. New Seasons Market became a client shortly after launching its Vancouver store in August 2012. Columbia Vista is another local participant in that program.

Additionally, HomeStreet significantly increased staffing to support single-family loans, hiring both locally and companywide. When MetLife Inc. was unable to find a buyer for its home loans division in late 2011, HomeStreet CEO Mark Mason hired hundreds of former MetLife workers. That allowed the bank to grow from one Clark County office to five over the course of 2012, and to boost total staffing in its single-family lending operation by 146 percent.

Federal policy was one factor that drove lending, especially refinances, said Ed Barbier, branch manager and senior loan officer at HomeStreet Bank in Vancouver.

Refinances accounted for a big share in HomeStreet’s business in 2012, and for all closed loans nationwide. Through a program known as “QE2” – for “quantitative easing, round two,” the government increased its purchases of mortgage backed securities and lowered interest rates overall.

“These lower rates spurred a refinance boom and played a large role in increasing closed-loan volume from 2011 to 2012,” Barbier said. “Refinances accounted for approximately 65 percent, industry-wide, of closed loans in 2012.”

Pinnacle Mortgage, which operates as Alpine Mortgage in Clark County, increased its Clark County loan volume by 89 percent – and could have grown more if it had adopted different strategies, said Brian Reynolds, vice president of Alpine’s retail division.

“Refinances were low-hanging fruit, we probably could have utilized call centers to pull in refis and could probably have made a lot of money,” Reynolds said. “Instead, we decided to focus on longevity.”

To Alpine, that meant a focus on new home loans, rather than refinances.

“In 2012, Realtors started getting busy again, but they were being ignored by most mortgage officers due to the low-hanging fruit of refinances,” Reynolds said. “We did lots of refis, but we put Realtors first.”

At a time when 80 percent of home loans were refinances, Alpine never dropped below 60 percent purchases, he said. The company boosted staffing by 30 to 40 percent, primarily so it could close purchase loans within 30 days and so it could maintain strong relationships with real estate agents, Reynolds said.

That strategy seems to be paying off in 2013.

“A 1.25 to 1.5 percent interest rate jump can make refinancing irresponsible,” Reynolds said. “We’ve actually grown this year, even though the refinance market is shrinking because of rising interest rates.”

In the first six months of 2013, Alpine issued $87 million in loans in Vancouver, up from $74 million in loans over the same period in 2012. Reynolds attributes that growth to strong referral relationships with Realtors.

“Refinance has diminished over the last few months for the industry as a whole,” HomeStreet’s Schaller said, but he added that there is growing interest among potential homebuyers.

“The main constraint on purchase activity is the shortage of available inventory,” he said. “As home prices are recovering, more inventory is entering the market. Additionally, home builders are active once again.”

However, the market remains tight for people seeking to buy a home, with sales ticking up in recent months but fewer houses on the market than before the 2007 housing crash.