The current — and somewhat robust — refinancing boom has to end sometime, and already mortgage bankers are asking the obvious: If home purchases don’t pick up, then what?

But for now, most lenders are doing what they’ve always done: they’re writing as many loans as possible, making as much money as they can with the idea that they can live off the fat of their earnings until the purchase market picks up again.

Currently, about 80% of all new loans originated are refis, compared to about 55% from 2007 through the fourth quarter of 2009.

According to preliminary third-quarter survey figures compiled by National Mortgage News, originations rose sharply during the period with some firms reporting gains of up to 40% or more.
There’s also a school of thought that the refinancing gravy train may run for several more quarters—well into 2011 and beyond.

“The consensus I’m hearing from my members is that rates are not going up anytime soon,” said Glenn Corso, who is managing director of the Community Mortgage Banking Project, a young trade group that represents small- to medium-sized residential funders.

Brian Benjamin, who runs a small boutique mortgage brokerage firm in northern New Jersey, sees a slightly different wrinkle on the market that hasn’t been talked about much — that lenders are not only refinancing new clients, but are serving customers who are on their second or third refis over the past 18 months.

“I just closed one,” said Benjamin, whose firm is called Two Rivers Mortgage. “And each time they saved $500 a month.”

He noted that he stays away from consumers who are refinancing to save only $100 a month.
The broker believes the mortgage industry may experience another 12 to 14 months of strong refi activity.

Corso confirmed that his members are doing the same thing: refinancing the same customer more than once.

“If rates go up, it could be a death knell, but no one thinks that will happen,” Benjamin said.
Even megalenders like Wells Fargo see the refi boom continuing on somewhat indefinitely.
During its recent earnings conference call, Wells’ CFO Howard Atkins said the “potential is very high” for the boom to last well into next year.

Of course, one concern persists: a lack of refi options for consumers with no equity in their homes.

Michael Foote, a broker who serves customers in Orange County, wonders where all the purchase money loans are, but admits he knows the answer already: they either don’t have jobs or are afraid of losing their current ones.

Foote noted that some of the best mortgage customers these days are government workers because they feel the most secure about their employment situation.

“I’m seeing a lot of that type of action,” he said.

Even the “hard money” business is picking up steam. Ilan Awerbuch, president of UniTrust Mortgage, San Diego, said volumes are rising at his shop but the telltale sign is an increasing amount of interest in what he calls “institutional money” willing to find his operations.

Many of his backers are high net worth individuals, but he’s beginning to get more phone calls from institutional clients. “I have to explain the business to them but once I tell them that our LTVs are 50% to 60%, they get comfortable with it.”

In today’s market, some hard-money firms are charging rates of up to 10%—a nice yield compared to money market funds of 1%.

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