Why This Mortgage Party Might Go on For a Long Time.

For the heck of it, I went back and looked at the column I wrote in October of last year, a time when almost everyone in the industry assumed that the refinancing party of 2002-2003 was indeed finally over.

What was I saying a year ago? Here goes: "I'm going to go out on a limb here and say, for the record, that mortgage rates could fall in the months ahead - that would be October, November and December of 2003."

OK, so I wasn't exactly right, but rates did fall in the spring of 2004 and in the second quarter of this year mortgage bankers funded $818 billion in loans, the industry's best showing in two quarters. The second quarter was also the industry's fifth-best quarter ever.

Am I a genius or what? Why doesn't Wall Street hire me to trade bonds? Actually, I am indeed no genius and I pity the investment banking house that would let me gamble with it clients' money.

But how did I get that feeling that there might be one last hoorah to the unprecedented refi boom? Answer: it just felt that way. I'm not an economist and I certainly don't intend on playing one in this column, but it doesn't take a rocket scientist to figure out that as long as the overall U.S. economy stinks, the mortgage industry will do just fine.

The weird thing, now, is that even though the economy is supposedly improving, mortgage rates have actually declined once again. At press time, the yield on the 10-year was at 4.17% and Freddie Mac had just released a revised forecast, saying loan production would total $2.6 trillion this year.

At $2.6 trillion, that would make 2004 the third-best year ever for the industry, just shy of the $2.76 trillion mortgage bankers funded in 2002. (Last year, of course, the industry set an all-time funding record of $3.9 trillion.)