Low Rates Keep Local Lenders Busy

Local mortgage companies are getting a boost from the lowest interest rates in decades, as homeowners rush to refinance their current loans and lock in lower payments.

Just as the first-time homebuyer tax credit was wrapping up this spring, and lenders were expecting a corresponding lag in business, interest rates sunk below five percent and jolted the refinance industry.

Smithtown mortgage companies say the increase has continued since then as rates have dipped lower and lower. According to Bankrate.com, the rate this week for a 30-year fixed-rate mortgage was 4.33 percent. That's the lowest rate on record at the Mortgage Bankers Association since the group started tracking mortgages in 1990.

For local lenders and brokers, that means more Smithtown residents and homeowners across Long Island are interested in refinancing their existing loans at the new rates to slash mortgage payments.

Nick Schiano, manager of All Island Mortgage & Funding, said a refinance can cut anywhere from $200 to $500 off a monthly payment, depending on how long the borrower has owned the house.

"We're doing more refinancing now than we have in the last 18 months," Schiano said.

Some homeowners are even willing to take a higher payment and get a 15-year loan, which carries an even lower rate, he said. A 15-year mortgage came with a 3.84 percent interest rate this week, according to Bankrate.com.

"A lot of clients who maybe have 20 to 25 years left on their loan are refinancing into 15 year mortgages," he said, adding that cutting the mortgage term in half can save a homeowner up to $100,000 over the life of the loan.

Richard Cassiano, owner of North American Resource Capital, said even rates on stated-income loans, which don't require borrowers to verify income and are usually much more expensive than full documentation loans, are low enough to be affordable.

He added those loans are now only available to self-employed borrowers.

But while low rates have propped up refinance business, local companies say they haven't brought a return to the glory days of mortgage banking.

"Has it been a boom? No, partially because the criteria for getting the mortgages these days is so much higher," Cassiano said.

Schiano said that most borrowers who bought their homes during the housing boom, and would thus benefit the most from a refinance because rates were so high then, have little to no equity in their homes, making a new loan impossible. Now that lenders will no longer mortgage 100 percent of a home's value, those with loans equal to or greater than their home is worth will not qualify for a new mortgage.

"If more people had equity in their homes, there'd be a lot more refinances," Schiano said. "I get a lot of calls, but can't help a lot of them because they have no equity."

He also said low rates have done nothing to spur home purchase activity, which did fall off after the homebuyer tax credit's expiration earlier this year.

Nancy Orlando, senior vice president of credit at Teachers Federal Credit Union, which has also seen an increase in mortgage activity, thanks to low rates, said she doesn't expect rates to rise in the near future, meaning local lenders for now can bask in the refinance jump. But the market is fickle.

"There's not anything on the horizon, but then again, if something happens, rates could move tomorrow," Orlando said.