Mortgage volume dropped almost 25 percent in Massachusetts last year, as a slight rise in purchase mortgages failed to make up for the plunge refinances took after a record 1998. Non-purchase mortgages decreased by 36.2 percent in 1999, with lenders closing $22.5 billion compared to $35.3 billion the year before.

A report by Warren Information Services, a sister company of Banker & Tradesman, tracked purchase and non-purchase mortgages from $25,000 to $1 million. The combined volume of $38.7 billion in mortgages was down 24.4 percent from 1998. However, 1998 was not the typical year. Low interest rates fueled business as home owners turned out in droves to refinance their mortgages. While lenders enjoyed the boom, they knew it would come to an end sometime.

To deal with the downturn, many companies have reduced staff and implemented cost-cutting measures, said Maureen R. Elliot, chairwoman of the Massachusetts Mortgage Bankers Association and senior vice president at Ivy Mortgage in Woburn.

I don’t think this has come as any surprise, Elliot said. I think everybody’s looking at everything they possibly can to increase business.

Bay State lenders closed 299,485 mortgages last year, down 20 percent from 377,045 the year before. The average value of the loans also declined, to $129,137 from $135,820 in 1998.

The number of non-purchase mortgages fell by 27.9 percent, from 273,452 to a total of 196,970 in 1999. The average value of the loans dropped to $114,241, compared to $129,103 the year before.

Purchase money mortgages rose slightly in the last year to $16.2 billion. That was up 1.8 percent from $15.9 billion in 1998. But the total number of purchase money mortgages closed decreased from 103,592 in 1998 to 102,515 last year.

Despite last year’s decline in volume, mortgage levels still hovered well above what Bay State lenders logged in 1997. Of the $28.3 billion in mortgages recorded that year, refinances accounted for $15.2 billion and purchase mortgages totaled $13.1 billion.

It was still a great year, Elliot said. It’s this year everybody’s worried about.

A low inventory of houses for sale is a big problem for many lenders in the Greater Boston area and across the state, mortgage lenders said. While a wider range of products makes it easier for lenders to pre-approve borrowers, borrowers often stay in the pipeline a long time while shopping for a place to live, said Howard Miselman, president of Continental Funding Corp. in Stoughton and chairman of the Massachusetts Mortgage Association.

We’ve done a number of things to help people qualify for loans, Miselman said. Now it’s up to them to find houses to buy.

To adjust to the change in the market, mortgage companies have turned to second mortgages, home improvement loans and home equity loans. Home owners that want an extra bedroom or a two-car garage have started to build their own instead of looking for a new house, Miselman said. Continental Funding Corp. has offered products with expanded ratios and employed automated underwriting to help people qualify. The company also promotes products with low or no down payments and first-time homebuyer programs. With the rise in interest rates, customers express more interest in adjustable rate mortgages.

Mortgage companies are pretty adaptive, he said.

The lack of supply is more of a problem than rising interest rates, Elliot said, because interest rates still remain affordable. She anticipates that the lack of supply will be a temporary problem. Listings have increased slightly in recent weeks, and more homes should go on the market with the spring selling season, she said.

The last two years it’s really picked up in the second or third week in January, Elliot said. Now we’re picking up in March, and that’s a typical housing market that we haven’t been in for a long time.

It is a good market for sellers because they can command top dollar for their properties, Miselman said. But once home owners sell they face the challenge of finding a place to buy.

Mortgage Market Share
The report ranked mortgage lenders by market share, with Fleet Mortgage and BankBoston taking the largest shares of the Massachusetts mortgage market. Fleet and BankBoston have merged and will integrate their mortgage operations. Separately, Fleet booked $1.3 billion in mortgages in 1999, taking a 4.5 percent market share. BankBoston’s $961 million in mortgages gave it a 4.2 percent market share.

Boosted by a large volume of refinances, Citizens jumped from No. 17 in 1998 to take third place last year. At $625.8 million in volume and 2.1 percent in market share, it still lags far behind the new FleetBoston. Citizens ranked third in non-purchase mortgages with $474.9 million in loans and a 2.6 percent market share. The Providence-based bank came in at No. 19 for purchase money mortgages, with $150.8 million in volume and a 1 percent share of the market.

Citizens made a concerted effort to boost its mortgage division, said spokesman Brad Minnick. Last fall the bank hired Barden Conn as senior vice president of Massachusetts sales and operations for Citizens Mortgage Corp. Conn began an expansion of the division, resulting in a 46 percent increase in the sales force since November. His goal is to double the size of the sales force.

A lot of Citizens’ jump from 1998 to 1999 was due to refis, Minnick said, Now, with a new director in place, with more products and an expanded sales force, the numbers are only going to expand.

Some of the bank’s jump in market share could be tied to its focus on affordable housing programs and underserved markets, Minnick said.

Norwest Mortgage is the mortgage company that took the greatest market share last year, finishing in fourth place behind the three banks. It had $895.2 million in loans and a 1.9 percent share of the market. The company ranked first in purchase money mortgages, with $611.4 million in mortgages and a 3.6 percent market share. The company, owned by Wells Fargo in San Francisco, has opened new offices in the region.

North American Mortgage Co. of Santa Rosa, Calif., ranked fifth with a 1.9 percent share of the market and a volume of $837.4 million. Washington Mutual bank jumped from the No. 15 spot in 1998 to sixth place last year, with 1.4 percent of the market and $777.6 million in loans.

Bank of America took 1.4 percent of the Massachusetts mortgage market with $762.8 million in loans. Countrywide Home Loan and Chase Home Mortgage Corp. both took 1.3 percent of the market.

Burlington-based Assurance Mortgage Corp. of America was the highest-ranked local mortgage company, rounding out the top 10. The firm took a 1.2 percent market share with a volume of $609.9 million, up from a total of $496.6 million in 1998. H&R Block bought AMCA in the first quarter of last year and began to market the company’s products to H&R Block’s 8,800 tax preparation offices across the country. AMCA is licensed to close mortgages in all 50 states.

Volume, Value Plunge In Mortgage Market

by Banker & Tradesman time to read: 4 min
0