Record-low rates aren't creating rush at local mortgage firms

Back to TopCommentsE-mailPrintBookmark and Share

Interest rates are in record-low territory, but demand for new mortgages and refinancing remains tempered in the Indianapolis area, industry executives say.

The average fixed rate on a 15-year mortgage fell nationally to an all-time low of 3.13 percent last week, Freddie Mac reported, while a traditional 30-year mortgage rate dipped to near-record low of 3.88 percent.

But local mortgage firms say low interest rates don’t always mean a big boost to business because broader economic issues are keeping large parts of the population from seeking or qualifying for loans. The country and Indiana have seen job gains in recent months, but unemployment remains high, with the jobless rate at 8.3 percent nationally and at 9 percent in Indiana.

When people are insecure with their job situation, they aren't likely to make big financial decisions.

“There is a tremendous amount of opportunity out there for refinancing and purchasing, but because of the unemployment, a lot of those people don’t qualify for loans today,” said Craig Royal, CEO of Indianapolis-based Royal United Mortgage LLC.

Royal United is seeing slow, steady expansion, Royal said, but not the robust growth many industry players saw prior to the recession. 

Royal co-founded the mortgage firm in 2008 with 22 employees. Last August, the company announced plans to expand its local operations by adding 140 employees by the end of 2013, bringing employment to nearly 300. Royal United now has 218 employees and is about halfway to its job-creation goal, Royal said.

Royal was chief financial officer at Oak Street Financial Services LLC from 1999 to 2007. Oak Street, which specialized in non-conforming loans, was one of the area’s fastest-growing companies for almost a decade and had more than 700 employees at its peak.

Oak Street filed for Chapter 11 reorganization in 2007 amid the subprime lending meltdown after selling most of its assets to Kansas City, Mo.-based Novastar Financial.

Unlike Oak Street, Royal United is a conventional lender, which limits its market, Royal said.

“It’s a much more competitive environment than at Oak Street,” he said. “The pool of available borrowers is smaller. At Oak Street, you could find any product to fit a borrower. The guidelines are different today.”

Still, Royal United and another local, fast-growing mortgage firm, Stonegate Mortgage, are having success, partly because several mortgage players exited the market during the housing crisis.

About 65 percent of their business comes from new home purchases and 35 percent through refinancing.

Stonegate Mortgage was founded in 2005 and does residential mortgage work, such as processing and underwriting loans; managing escrow accounts; and purchasing mortgages from financial institutions.

The firm was based in Fishers before moving its headquarters last year to The Precedent office park near Keystone Avenue and East 96th Street in Indianapolis, to accommodate a planned expansion.

In December 2010, Stonegate pledged to hire 300 workers by 2015 and expects to add 100 of those by the end of this year, CEO Jim Cutillo said. With $15.4 million in revenue at the end of 2010, the firm was the second-fastest growing company in the Indianapolis area, according to IBJ statistics. Its grew revenue 491 percent from the previous three years.

Much of the growth can be attributed to Stonegate’s expansion into 26 states. It plans to enter nine more by the end of June.

“We’re seeing some pick-up in our business from the lower rates and the [mortgage insurance] premiums being lowered,” Cutillo said. “But some of that pick-up is because some of the other lenders have exited the business. We’re grabbing market share because we’re a non-bank and we have the capital.”

On March 6, the Federal Housing Administration said it will lower mortgage insurance premiums for borrowers who refinance their loans as part of the federal government's plan to boost the housing market.

Under the plan, the FHA will reduce up-front premiums to 0.01 percent of the total loan amount from 1 percent. Annual fees will be cut to 0.55 percent from 1.15 percent for borrowers with FHA loans made before June 1, 2009.

Another mortgage-assistance initiative, the Home Affordable Refinance Program, or HARP, gives underwater borrowers the opportunity to refinance their homes, even if they owe up to 125 percent of the value of the home.

Many banks aren’t promoting the program because they’ve shed some of their mortgage business following the housing crisis, Cutillo said.

“We believe it has merit,” he said, “but we’re a non-bank.”


Post a comment to this story

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
Subscribe to IBJ
  1. I'm sure Indiana is paradise for the wealthy and affluent, but what about the rest of us? Over the last 40 years, conservatives and the business elite have run this country (and state)into the ground. The pendulum will swing back as more moderate voters get tired of Reaganomics and regressive social policies. Add to that the wave of minority voters coming up in the next 10 to 15 years and things will get better. unfortunately we have to suffer through 10 more years of gerrymandered districts and dispropionate representation.

  2. Funny thing....rich people telling poor people how bad the other rich people are wanting to cut benefits/school etc and that they should vote for those rich people that just did it. Just saying..............

  3. Good try, Mr. Irwin, but I think we all know the primary motivation for pursuing legal action against the BMV is the HUGE FEES you and your firm expect to receive from the same people you claim to be helping ~ taxpayers! Almost all class action lawsuits end up with the victim receiving a pittance and the lawyers receiving a windfall.

  4. Fix the home life. We're not paying for your child to color, learn letters, numbers and possible self control. YOU raise your children...figure it out! We did. Then they'll do fine in elementary school. Weed out the idiots in public schools, send them well behaved kids (no one expects perfection) and watch what happens! Oh, and pray. A mom.

  5. To clarify, the system Cincinnati building is just a streetcar line which is the cheapest option for rail when you consider light rail (Denver, Portland, and Seattle.) The system (streetcar) that Cincy is building is for a downtown, not a city wide thing. With that said, I think the bus plan make sense and something I shouted to the rooftops about. Most cities with low density and low finances will opt for BRT as it makes more financial and logistical sense. If that route grows and finances are in place, then converting the line to a light rail system is easy as you already have the protected lanes in place. I do think however that Indy should build a streetcar system to connect different areas of downtown. This is the same thing that Tucson, Cincy, Kenosha WI, Portland, and Seattle have done. This allows for easy connections to downtown POI, and allows for more dense growth. Connecting the stadiums to the zoo, convention center, future transit center, and the mall would be one streetcar line that makes sense.