Homeowners deluged mortgage brokers with calls Wednesday, hoping to take advantage of sharply lower interest rates to refinance into cheaper loans.
Countrywide Financial Corp., the nation's biggest mortgage lender, said call volume jumped by at least 50% over last week. Independent brokers such as John West of Orange County also said their phones didn't stop ringing.
"In 20 years in the business, I have never seen rates fall this far this fast," West said. "I think lenders are really going to have to gear up. None of us were ready for this."
The frenzy was triggered by the Federal Reserve's surprise decision a day earlier to slash its benchmark lending rate to 3.5% from 4.25%. That pushed rates on some 30-year, fixed-rate loans to as low as 5.125%, down from 5.5% last week and from 6.3% a year ago.
Including the add-on fees known as points, West said a homeowner with a $400,000 loan at 6.5% could easily cut that rate by a full percentage point. That would trim the monthly payment on a 30-year loan from $2,528 to $2,271 -- a savings of $257.
Not everyone will benefit from the Fed's action, however. Rates on fixed-rate "jumbo" loans (those exceeding $417,000) have barely budged from about 6.5%.
Moreover, an appraisal must confirm that borrowers have at least 20% equity in their home after the refinance -- a requirement that will exclude many struggling homeowners who have seen their properties decline in value.
Still, for people such as Shari De Cambra of Chino Hills, the rate cut provided the opportunity to trade the uncertainty of an adjustable-rate loan for the security of a mortgage with a fixed rate of 5.25% for 30 years.
"I don't want to ever do it again," De Cambra, who teaches math at Diamond Bar High School, said of her second refinancing. "Every time it costs you money."
The beneficiaries of the rate cut also include mortgage lenders themselves, who have been battered by the housing slump and by rising defaults, especially on 100% financing deals and sub-prime loans to borrowers with feeble credit.
Neil Gitnick, president of Value Home Loan in Woodland Hills, said that his business had doubled from year-earlier levels in recent weeks, after previous mortgage rate declines, and that he recently hired four loan officers and a loan processor, boosting his staff to 25.
"We are using this market to grow," said Greg Nierenberg, the company's branch manager. "We are hiring new loan officers on a regular basis. We are recruiting."
