From extraordinary to ordinary? The mortgage industry looks at 2003's boom while keeping an eye on 2004.

• Author: Burningham, Lucy
• Position: ResidentialRealEstate

Ask almost anyone in the mortgage industry about business in 2003 and you'll hear words such as "unparalleled," "abnormal," "the best ever" and "extraordinary." Are these brokers and lenders simply overstating the truth?

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Not exactly. They have every reason to view 2003 as a historic year. With some of the lowest interest rates in decades remaining consistent through the end of December, refinancings kept mortgage brokers and lenders busy--and happy with their profits.

But 2004 is expected to bring the industry more down to earth, as most homeowners who were capable of refinancing have already done so--once, twice and sometimes even three times. "We're back down to reality," says Gary Nielson, vice president of Republic Mortgage. "And that's not all that bad, it's simply that we just had a phenomenal year." As 2004 begins, the number of refinancings has already begun to drop, despite the fact that interest rates remain under 6 percent on a 30-year fixed loan. Current rates are up from the 40-year low of 5.21 percent of mid-June 2003.

"In the late '80s, my wife and I got a 10 1/2 percent interest rate," says Kay R. Ashton, past president of Utah Mortgage Lenders Association and Utah district manager and vice president of the Home Loan Corporation. "We were ecstatic. No one would want that now unless they were desperate."

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Rather, homeowners have been eagerly refinancing to take advantage of the economy-boosting low rates. Rex Rollo, CFO of America First Credit Union, says the credit union did 70 percent higher total volume of mortgages during the past two years due to the refinancing boom. "Refinances made up 80 percent of our total volume last year," he says. "Even though we're not going to have the exciting times we had in 2003, we're still planning on 40 percent volume in refinances this year."

Many lenders say they are now ready to track down homeowners who are capable of refinancing but haven't done so even once during the past few years. Ashton says he sees two reasons why people might not have refinanced. "One is just laziness and not wanting the hassle," he says. "The other is naivete." Ashton explains that many homeowners pay 10 years of a 30-year loan and don't want to start over again with a new one. But that false perception costs them money in the end, he says.

Still, Ashton notes the current glut of radio ads targeting consumers who haven't yet refinanced and reminds homeowners to look closely at...