Refinancing Mania.(Brief Article)

Runoff, churning, impairment. It's that time of the mortgage lending cycle again. With rates hitting their low point in almost two years, a large volume of loans that are outstanding have become eligible to refinance, saving homeowners hundreds of dollars a month in many cases. With two Fed rate cuts under our belts and possibly more to come, some industry economists think 30-year mortgage rates may average below 7% this year.

Much of the $5 trillion in mortgage debt outstanding already is "cuspy," as people in the industry say. With so many homeowners on the cusp of being able to refinance and save money, rates will not have to fall much further for the mini-refinancing boom experienced in January to pick up steam and staying power. Already, some people are predicting that lending volume in 2001 could exceed the $1.5 trillion threshold reached in 1998. And almost everyone expects lenders to originate at least $1 trillion in new loans this year.

That raises questions for mortgage servicers. Are you doing everything you can to maximize portfolio retention? After all, it's cheaper to keep an existing customer on the books than go out and find a new one. Are you ready to handle the re-conveyance challenges associated with a heavy volume of lending. If consumers find that lenders are not complying with deadlines for releasing the liens when loans pay off, that could spark litigation from angry homeowners. It's happened before.

Then there's that nasty ...