Chillin' out till it needs to be funded
The rush of US homeowners to refinance mortgages at lower rates is creating a boom in the home lending business, prompting banks to hire thousands of new employees and put them to work on extra shifts to process mountains of paper.
“Many of them work all day, go home and have dinner with their families, then go back to the office and put in a few more hours, because there’s work to be done,” said Greg Gwizdz, national sales manager of the Wells Fargo home mortgage unit.
Lenders could originate up to $2,780bn of new mortgages this year, the Mortgage Bankers Association says. Statistics from mortgage financiers Fannie Mae and Freddie Mac suggest 80 per cent of that activity could involve refinancing.
With interest rates for 30-year fixed rate mortgages at around 5 per cent, US homeowners could save close to $18bn on their mortgage repayments this year if they refinance, according to economists at Freddie Mac.
The process is taking longer than in past booms because of the disappearance of easily handled “no-documentation” mortgages – a product that played a signficant role in causing the subprime lending crisis.
Ken Lewis, Bank of America chief executive, said on Monday his company was adding 6,000 workers to beef up its mortgage capabilities. Wells also has added mortgage staff, although it won’t give out specific numbers.