Falling Interest Rates Spur Refinancings;
to Add Staff or Not to Add Staff?
The interest rate cuts by the Federal Reserve have spurred a refinancing boom that has many mortgage lenders revving their engines to bring in more business,but they also are trying to find the right gears.
“We are booming. Everyone in the industry is swamped and trying to keep up with it,” said Patricia Geist, a first vice president and regional manager for Washington Mutual Inc.
“The last six months has exploded for us,” said Anthony Hsieh, chief executive of online mortgage lender Loans Direct Inc., now a subsidiary of E*Trade Group Inc. Along with the increased use of the Internet for new mortgages and refinances, Loans Direct has benefited from the thousands of homeowners that want to reduce their monthly payments.
The small, offline firms are also getting more business.
“We refinanced one-third of our clients in the last 60 to 90 days. And most of the companies I know are busy,” said Shelly Cofini, founder of Newport Beach-based Equitystore.com, which, despite its name, doesn’t handle mortgage transactions online. Equitystore.com has eight employees and expects to do about 300 loans this year. But Cofini isn’t planning to take on more people just yet.
“Our plan for growth is not to get caught up in our hype. I have seen a lot of companies get greedy. We appreciate the increase. But we will stay with our core business,” Cofini said.
When demand for loans increases, many companies have to hire new employees to handle the growth. But once the frenzy to refinance subsides, many of those employees are left without any work to do, Cofini said.
Falling interest rates started the increase in mortgage refinancing, but the media has played a role, too.
“The news has stirred interest,” Cofini said.
News organizations have closely followed Federal Reserve Chairman Alan Greenspan’s every move, reporting to the public every flinch or twitch. Billboards on the sides of freeways that post daily interest rates have reminded people about refinancing their homes.
“When they post lower rates on the billboards, it generates more phone calls,” said Mike Rodriguez, a mortgage broker with Irvine-based Global Mortgage Funding Inc. and a member of the board of directors of the Orange County chapter of the California Association of Mortgage Brokers.
But lenders are not complaining about the growth.
“We are able to catch a lot of former customers and also bring new people,” said Gene Hagio, a first vice president and regional lending manager for California Federal Bank.
Thanks to the growth, banks, thrifts and mortgage lenders should see increased earnings for the next few quarters.
The drop in interest rates is an attempt to prevent a dramatic economic slowdown, but it also is slowing lenders’ turnaround times. The extra loan activity has forced some lenders’ employees to work longer hours.
“It has slowed our processing time. That is the daily challenge to resolve and we are taking steps to modify work flow,” Hagio said.
“It is taking more time than normal. We rely on other services like escrow services and other lenders. Those are out of our control,” Geist said.
The independent brokers, who rely on quick turnaround times to retain customers, also are experiencing problems with the increase in activity. Geist said the typical loan takes about 30 days to complete, but because of the traffic, that has been pushed to more than 45 days.
“Some lenders are 60 or 70 days out,” Geist said. To handle its growth, Washington Mutual has hired new employees and temporary employees, but has also relied on contract underwriters.
“Our customer service is important to us,” Geist said.
But lenders are not the only companies that are being affected. Other companies that work with lenders, such as appraisers, escrow companies and title companies also are getting more work.
“Title companies usually have 24-hour turnaround. Now it is five days,” Rodriguez said.
Larry Buster, a vice president and county manager for Santa Ana-based First American Corp., said the company has been extremely busy with new orders and has had to make some adjustments to handle the work.
“Mostly doing a lot of overtime, so that work is produced. We have had to hire a few people to keep up,” Buster said.
Buster said he has a staff of about 160 and he recently hired five. Buster expects the boom to last about six months, which is why he did not hire more people and is relying on overtime to handle the work.
“If you know you are doing this for a year, you have to increase staff. If it is three to six months, you just try to cover with overtime,” Buster said.
First American’s Orange County title insurance neighbor, Irvine-based Fidelity National Financial Inc., also has seen the same activity, according to company officials. n
