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Low rates spark surge in business

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By Scotty McDaniel

With record low mortgage rates, it sounds like now is the time to buy a home or refinance your mortgage. But how long will that value last?

Brady Webb, a Certified Mortgage Planner with American Mortgage Solutions in Shelbyville, said he is optimistic.

"We're probably going to see mortgage rates continue to slide sideways and possibly move lower over the first two quarters of 2009," Webb said.

Back in November, the Federal Reserve announced that it would buy as much as $500 billion in mortgage-backed securities over the first six months of 2009 to increase demand for them and lower rates. The desired result was to keep mortgage rates low and stimulate home sales.

Since then, 30-year fixed mortgage rates have dropped from above 6 percent to around 5 percent, fueling an increase in refinance and loan applications.

Though the economy has created a dark cloud over much of the country, those lower mortgage rates in Shelby County are providing rays of sunshine to money-tight citizens battling bills and job instability.

"The biggest thing now is if you want to buy a new home or look to restructure your current obligations or debt structure, now is a great time to get in touch with someone to have them do a financial checkup," Webb said.

One of Webb's clients recently refinanced his mortgage and is now saving $350 a month. Situations differ, but simply reorganizing things can save people thousands of dollars, he said.

Many customers at Citizens Union Bank appear to be trying to do the same thing.

"With our bank we're going through a refinance boom," said Chris Waford, VP of mortgage lending at CUB, "we've had $25 million worth of loans since Christmas. Normally we have about $5 million a month. In about a month's time, we've had about 150 loan applications. Typically we see about 30 in a month."

Those numbers cover all of the CUB banks, but Waford said Shelby County accounted for about $15 million of those loans. 

He estimated that 85 percent of CUB's loans in Hardin, Jefferson and Shelby counties are refinances, 10 percent are for first-time home buyers, and the other 5 percent are homeowners looking to purchase new houses.

Other local banks are seeing a growth spurt in business, too.

Company-wide, Republic Bank has had $130 million in applications during the past 30 days.

Frank Tipton, VP of Republic Bank, said his bank mostly is encountering people taking advantage of the low mortgage rate to refinance to save some money and get their term down from 30 years to 20, or even 15 years to get out of debt sooner.

Those numbers are consistent with statistics from the Mortgage Bankers Association, which states that the majority of mortgage applications are to refinance existing loans, not to buy a home.

"People have to realize that rates are this low," Tipton said. "People don't think banks have money to lend. Community banks like ourselves, we have money to lend."

Stricter guidelines are in place to qualify for the best rates. However, it's still possible for people who don't have a great credit score, a lot of equity in their home, or a solid income to get loans at good rates.

There is a lot of uncertainty about what the rates will do in the future. But for now, several local banks, realtors and brokers tend to agree that people should strike while the iron is hot.

"Why wait?" Waford said.