With mortgage rates nearly a point higher than they were earlier this year and much of the refinancing demand satisfied, the white-hot home-loan market has cooled considerably, perhaps signaling an industry shakeout.


Some of the decline in refinancings has been cushioned by a strong real estate marketwith home sales up 14 percent so far this yearbut that might not be enough to support a home-lending industry that bulked up to meet the previously hot refi demand, says Gary Marks, a senior loan consultant here with mortgage giant Washington Mutual Bank.


I hear names in the market of new mortgage companies, he says. In five or six months, a lot of these places will be gone.


Jim Kirschbaum, president of Spokane-based Action Mortgage Co. and a 40-year veteran of the mortgage industry, says hes unsure whether offices will be shuttered here, but loan officers will have to work harder to stay in the business.


Its been easy for a loan officer to sit in his office, take phone calls, and make $20,000 a month, Kirschbaum says. Those days are gone.


Mortgage rates currently are hovering around 6 percent for a 30-year, fixed-rate loan, and between 5 and 5.5 percent for a 15-year loan.


Those rates are still comparatively low. Just four years ago, 30-year, fixed-rate mortgages were going for between 8.5 and 9 percent, and rates were much higher than that in the early 1980s. Still, mortgage rates today are just under a percentage point higher than they were earlier this year.


Rates continue to fluctuate somethey dipped slightly in recent weeksbut Karen Oaks, manager of Washington Trust Banks home loan center, says they are expected to remain reasonably stable through the rest of this year. That, she says, is unless there was some catastrophe in the economy or some event affecting homeland security.


With the decline in refinancings, though, Kirschbaum says national mortgage industry organizations are predicting there will be a 30 percent drop-off in mortgage lending activity. That could signal changes in the national home-lending market.


The industry as a whole has grown significantly during the past five years, and now, he says, The industry will probably right-size itself.


Nationally, some major mortgage companies already have reported layoffs of clerical and sales-support staff.


Ameriquest Mortgage Co., an Orange, Calif.-based lender that opened a loan-origination center in Liberty Lake last year, hasnt had to lay off any workers here, but also hasnt grown in the Spokane market as fast as it originally projected, says Executive Vice President Adam Bass.


When Ameriquest announced plans for a loan-origination center here last fall, it said the center would employ 125 people by the end of 2002. About a year after opening, however, the center employs about 60 people.


The market has changed some, but were growing, Bass says. Were looking forward to continued growth in Spokane.


Activity slows


Marks says that in September, Washington Mutuals home-loan operations here remained busy completing refinancings for which customers had locked in mortgage rates in July and August, and have waited two to three months to close on their loans. Throughout September, however, new refinance applications decreased significantly, he says.


Weve got the back end of the elephant going out the door right now, Marks says.


Kirschbaum says Action Mortgage has seen the same trend.


Applications for the refinance piece of our business have fallen off a cliff, so to speak, he says.


Higher mortgage rates are the main reason for the decline in refinancing activity, but some say a slowdown in refinancings might have occurred even if mortgage rates hadnt crept upward. Thats because during the past two years, when rates dipped into the 5 percent range a number of times, it seems as though everybody who could benefit from refinancing did so, says Washington Trusts Oaks.


Its hard to believe theres someone out there who hadnt taken advantage of it, she says.


Through the last couple of years, some people even became what Oaks calls serial refinancers who refinanced the same home two or three times a year as rates clicked downward. Doing so can make financial sense if a homeowner plans to stay in the same home long enough for the savings on interest payments to offset the cost of refinancing.


Most of those customers have secured mortgage rates that are low enough that refinancing wouldnt be beneficial at todays rates, she says.


Home sales cushion


Meanwhile, a healthy market for home salesboth new and existinghas buffered the decline in refinancings, those in the industry say.


According to the Spokane Multiple Listing Service, overall Spokane-area home sales through the first eight months of this year climbed 14 percent, to about 4,500 home sales, compared with the year-earlier period. That increase was fueled largely by sales of new homes, which soared about 34 percent, to about 650 new-home sales, the MLS says.


Marks says that home loans always have been Washington Mutuals primary focus, which means the decrease in refinancing activity shouldnt profoundly affect its operations here.


Refinancing is gravy business that comes and goes, but you dont exist focusing on refi activity, he says. If you do, you wont be around very long.