Some lenders also are making it easier and quicker to take out refinancings by speeding up the process of getting appraisals, credit checks and the like. These lenders are mindful of the 1986-87 refinancing boom, when delays in loan processings and other snafus resulted in some borrowers waiting as long as five to six months to get loans.
However, the refinancing trend could hurt profits at savings and loans that offered the deep-discount teaser rates on ARMs in recent years. Some S&Ls set these loans at initial rates so low that they incurred losses on them, hoping to recoup later through loan servicing fees or by selling the loans. But if homeowners refinance those ARMs earlier than expected, these S&Ls may not recoup their losses.
"This is not going to help them in their effort to build up capital or net worth," said Richard W. Peach, deputy chief economist for the Mortgage Bankers Assn.
The refinancing spurt could also hurt some California S&Ls that are dependent almost exclusively on adjustable-rate lending. Thus, some S&Ls are switching lending volume toward fixed-rate loans.
At FarWest Savings & Loan in Newport Beach, for example, new loan volume, including refinancings, has picked up about 40% in the last month. "And it's running 4-1 in favor of fixed rates," said Clifford Piscitelli, an executive vice president. "That's a complete reversal from as recently as 60 days ago."
Both FarWest and another local lender, Downey Savings & Loan, expect to start hiring more loan officers to handle what they see as a coming explosion in fixed-rate mortgages.
The lure of switching to a fixed-rate loan from an ARM is prompting some lenders to drop their normal advice that borrowers should refinance only if they can get a new loan rate 2 percentage points below their current one. Some ARM borrowers should refinance if a fixed rate loan merely gives them more security, Anderman of CompuFund said.
But some financial planners advise borrowers to wait a few weeks. "We expect that rates will drop further," said Tom Gau, a Torrance financial planner.
Times Staff Writer James S. Granelli in Orange County contributed to this story.