The Spokesman-Review Newspaper
The Spokesman-Review Newspaper The Spokesman-Review
Spokane, Washington  Est. May 19, 1883
Current Temperature
39°F
Current Conditions
Scattered clouds
View complete weather report
Subscribe now

Mortgage lenders seek wider customer base

Mortgage lender Regina Lowrie of Horsham, Pa., talks with a co-worker. Mortgage bankers processed close to $4 trillion of mortgages in 2003, a banner year. (Associated Press / The Spokesman-Review)
Associated Press
Mortgage lender Regina Lowrie of Horsham, Pa., talks with a co-worker. Mortgage bankers processed close to $4 trillion of mortgages in 2003, a banner year. (Associated Press / The Spokesman-Review)

ORLANDO, Fla. — Faced with an expected drop in mortgage lending because of higher interest rates, mortgage bankers say they have a few consumers they’ll court more aggressively — namely home owners with adjustable rate mortgages, America’s aging population, minorities and immigrants.

Adjustable rate mortgages (ARMs) have been increasingly popular in recent years because they allowed borrowers to qualify for larger loans. These loans offer an initial period of lower borrowing costs, but after a set period — typically from one to seven years — monthly payments increase.

The adjustable mortgages have also become popular because many home owners move from their homes before the borrowing costs actually adjust higher. But, for those who do not move, higher costs may prompt them to refinance into a fixed rate mortgage or another ARM.

Prashant Kothari, president of String Information Services, which provides outsourcing to mortgage lenders, estimates that as much as $300 billion of the adjustable rate mortgages could be refinanced next year and another $1 trillion could be refinanced in 2007.

At the same time, lenders are expecting the baby-boomer generation to borrow money with reverse mortgage loans that allow them to cash in on their home equity. While previous generations of home owners have looked to pay down their debts going into retirement, the baby boomer generation is seen as more comfortable with taking on debt in its retirement years.

According to the Mortgage Bankers Association, a survey of 110 mortgage banking companies found that demand for reverse mortgages rose 28 percent in the first six months of 2005 from the second half of 2004.

Lenders also said they expect to increase efforts to lend to minorities and America’s growing immigrant population.

According to Regina Lowrie, president of Horsham, Pennsylvania-based Gateway Funding, the next two decades will see 30 million new Americans. Speaking at an industry conference here, Lowrie said that means some 13 to 15 million new households will need $6 trillion to $7 trillion to finance these home purchases.