With interest rates dropping, his staff growing and the switchboard swamped with calls, mortgage broker John Eberhardt figures he will be skipping a summer vacation this year.
“The question is, ‘Can you afford to walk away from your office?’ ” said Eberhardt, vice president of operations at Prime Equity Management in Torrance. “The way things are going, most mortgage brokers won’t be enjoying this summer.”
It was only a few months ago that the mortgage business was bracing itself for the refinancing boom to peter out and home sales to cool off in the face of a projected rise in interest rates. But instead of increasing, mortgage rates have continued to hit new lows -- as they did last week -- and have left the industry scrambling to keep up with yet another wave of loan applications.
Mortgage and other interest rates have sagged since the Federal Reserve expressed concerns about the potential for deflation -- a general decline in prices for goods and services -- to undermine an already weak economy. The average rate on a 30-year, fixed-rate mortgage fell to 5.45% for the week ended Thursday, according to mortgage company Freddie Mac. That’s the lowest level since Freddie Mac began tracking rates in 1971.
The most recent decline triggered a new round of mortgage applications, which for the week ended May 9 rose more than 13% from the previous week, according to the Mortgage Bankers Assn. of America.
After originally forecasting a drop of more than 25% in loan volume this year, the trade group has made several revisions to reflect the stronger-than-expected demand for loans. In its forecast issued Wednesday, nationwide loan volume now is seen rising about 21% from last year’s record level, to about $3 trillion in new mortgages and refinancings.
“I’m completely astounded,” said Westchester mortgage broker Ted Grose, who has been in the business for 19 years. “I thought we would see some significant chilling in the refi market. It hasn’t happened.”
In fact, Grose said he is handling four times as many phone calls from clients as before rates began sinking early this month. The 49-year-old broker has abandoned a planned getaway to San Antonio and said he will be working Saturdays for the foreseeable future
Grose, who also is president of the California Mortgage Brokers Assn., said many of his peers are expanding staffs and contracting out tasks to cope with demand.
Many brokers and bankers have had to increase salaries and pay bonuses to attract and retain key employees, such as sales staff and loan processors, who keep tabs on paperwork during transactions, Grose said. Some top processors now command annual salaries of $100,000 and enjoy bonuses of up to $100 on each completed loan.
With experienced workers in high demand, Bruce Norman, president of First Mortgage Corp. of Diamond Bar, said he is constantly fending off rivals trying to poach his employees by offering $5,000 signing bonuses and 25% salary increases.
“The recruiters are calling night and day,” said Norman, whose company employs 240 workers across the West. “So it’s hard to protect your staff.”
In Torrance, Eberhardt at Prime Equity Management said the small loan brokerage recently doubled its sales force by adding six mortgage agents and on Friday welcomed two additional loan processors.
Recent weeks have been spent adding desks and reconfiguring the main office to accommodate the newly expanded staff of 17.
The expansion will bring some relief for Eberhardt, who hasn’t left the office before midnight in recent days. The 45-year-old mortgage broker said his loan volume is running about 50% ahead of last year, and it now takes him about 24 hours to return most calls.
“You have to be able to work with people who are stressed out. All your homeowners are very stressed. In many cases, the lenders cannot cope with the volume,” said Eberhardt, who has been in the business since 1991. “It can be very, very strenuous.”