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Call Monday through Friday 9-5. 1-800-544-2086 ext. 300 DATA SYSTEMS NETWORK CORPOR A T I O N 24401 Halsted Road, Farmington Hills, Michigan First-tim• customers, bring in this ad to save $5.00 off any repair serpice. Good until 6-30-95. (One hour serpice charg• required.) b HEWLETT Atil horized Reseller Advertising in the Jewish News gets results. Place your ad today! B38 Call (810) 354-6060 Business The Incredible Shrinking Business Rising interest rates have dropped the hammer on the mortgage refinancing boom. R.J. KING SPECIAL TO THE JEWISH NEWS C losings, layoffs and merg- ers. How else can you de- scribe the mortgage refinance business, which blossomed and then bottomed from 1991 to 1994? Many homeowners refinanced their mortgages to lower rates from 1991 to 1993 and saved con- siderably on monthly payments. But last year, a booming econo- my and inflation fears led the Federal Reserve to raise interest rates six times. At the end of January, the Fed- eral Reserve raised rates once again, which means financing a new home, car or boat will be- come even more expensive. In- terest rates on credit cards will rise as well. The average for a 30-year fixed rate mortgage in metro Detroit went from 6.90 percent to 9.05 percent last year. And along the way, there was a fallout in mort- gage jobs and firms — national estimates reveal the industry shrank 35 percent. "Today, refinancing represents 20 to 25 percent of our business, where during 1992 and 1993 it was 75 percent of our business," said Lindsay Gross, executive vice president of Rock Financial Corp. in Bingham Farms, which operates 11 offices, seven of which are in Michigan. "Believe it or not, there still are some people who didn't catch the first refinancing wave," Mr. Gross said. "Most of our refinancing to- day is for adjustable-rate mort- gages (ARMs) which have a 2 percent annual hike and a 6 per- cent cap (over the life of the loan)." For mortgage firms that are nimble and savvy, the drop in re- financing hasn't meant tremen- dous losses. In fact, many firms are educating consumers in an effort to create new refinance business. While many homeowners have taken out home-equity loans to finance everything from cars and home additions to college educa- tions and bar mitzvahs, refi- nancing programs generally offer lower finance charges. Firms like Rock Financial will refinance ARMs that are sched- uled for an annual increase — say from 6.5 to 8.5 percent. Mr. Gross said under such an ARM, his firm would refinance the loan to 7.25 percent. He said the only fees would be digit drop in single-family home for title insurance, which on a listings in 1994 across metro De- $150,000 home might total be- troit, though with more residents tween $300 and $400. staying put, the remodeling mar- "A majority of Jewish home- ket has been on a steady up- owners in metro Detroit have re- swing. financed their mortgages in In Troy recently to address the recent years. While that was a Builders Association of South- very good business, the market eastern Michigan, David Seiders, has fallen off considerably," said chief economist of the National Robert Rubin, presi- PHOTO BY GLENN TRIEST dent of Investaid Corp. in Birming- ham. "A number of firms emerged and disap- peared (during the re- finance cycle). They hired bright, shiny graduates who had a contact list of friends and neighbors and they helped a lot of people. But once rates went up, things went downhill." Mr. Rubin, whose firm specializes in writing non-conform- ing mortgages, said company revenues will double this year despite the industry downturn in refi- nancing. The firm currently has offices in six states and is ex- panding. "We write mort- gages where people Lindsay Gross of Association of Home can use the money to Rock Financial. Builders, said he was advis- buy a car, consolidate ing builders and buyers to be their credit-card bills cautious and conservative in or start a line of credit. If you're 1995. paying 18 percent interest on "First off, one of the things credit cards and take a second we're seeing with builders, both mortgage with us for 12 percent, nationally and regionally, is a well, you can see the savings," good number of spec building go- Mr. Rubin said. ing on. They're building homes Interest rates are not expect- without buyers being lined up. ed to fall anytime soon because It's getting rather alarming," said the national economy grew 7.6 Mr. Seiders. percent last year. In addition, due "There are a number of unsold to the refinancing wave, many houses, and eventually the people must stay put for a few market's going to fall off. In a years to recoup the initial finance sense, I'm warning builders that charges. this is not the time to be out there A reduction in state property building spec homes. For buyers, taxes last year, along with a new scour the ARM market. There are real-estate transfer tax of .75 per- still some very nice buys out cent which went into effect in there. Michigan on Jan. 1, also will en- "But be careful of buying (an courage homeowners to stay ARM) with a big adjustment at where they are because most the end of the first year. If you aren't anxious to move up and can lock in for three, five or sev- take on higher monthly pay- en years, do so. And I'm telling ments. builders to get anything (price) The result has been a double- they can to sell."