Big drop in refinancings hits counties’ budgets

If Hillsborough County takes in less money from its Registry of Deeds office than the county commissioners anticipated, they can’t say they weren’t warned.

According to Deputy Registrar Annette Jacques, “We’re budgeted this year for $5.5 million. That’s what they’ve anticipated for revenue. We were on record from the get-go that that was a high number. We were not real comfortable with it, but that’s what they chose to put in there.”

At first glance, $5.5 million might seem too modest a goal, since the registry took in a whopping $7 million just last year. But Jacques reports revenues this year are running about 40 percent behind last year’s pace for one obvious reason: With interest rates going up, fewer people have been refinancing their home mortgages.

For the first four months of the current fiscal year, July through October, the office took in $1.27 million in recording fees, Jacques said, compared to $2,253,000 for the same period last year.

“That drop represents primarily (a decline in) refinancing,” she said. Revenue from property sales increased slightly, as the county’s 4 percent share of the state’s real estate transfer tax amounted to $691,000 for the first four months of the 2005 fiscal year, compared to $642,000 at the same time a year ago. But Jacques anticipates a slowdown over the next few months.

“Winters are slower in volume. Things usually don’t pick up until April, May and June,” she said, adding that with strong spring sales, “maybe we’ll hit $5 million.”

In Rockingham County, Registrar of Deeds Cathy Stacey expects to finish 2004 with $5.43 million, a 22 percent drop from a year ago. She attributes the difference to last year’s hyper-activity in mortgage refinancing.

“We anticipated last year, before the interest rates went up, that the refinancing would dry up,” she said. “Because you had some mortgage companies out there that, every time the interest rates dropped a quarter of a point, were calling people offering to do the refinancing for nothing at the lower rates. We had people on staff refinancing two or three times within the same calendar year.”

In Merrimack County, the registrar’s office collected $777,563 on 13,169 mortgage transactions through October of this year, compared to $1.1 million on 16,885 mortgages during the first 10 months of 2003.

“We’re certainly doing much less business this year,” said Registrar Kathi Guay. “Refinancing has slowed considerably.”

But a continued rise in property values has brought the county more real estate transfer revenues from fewer sales. While 4,378 deed transfers brought in $404 662 a year ago, the county has collected $454,654 on just 4,207 sales this year, she said.

“We’re down about $300,000,” Guay said of the overall revenue picture. “A lot of people were refinancing three or four times last year. Obviously that isn’t happening this year.”

Feverish activity

Revenues are down about $25,000 at the registry in Belknap County, where the drop in mortgage fees has been largely offset by sales of new properties.

“Our document count is down, but the transactions are very sizable,” said Registrar of Deeds Rachel Normandin. “We’re seeing nice healthy transfers, as opposed to one refinancing after another, which we were seeing at this time last year.”

Several large developments in the lakeside communities of Laconia and Meredith have sparked a surge in the sale of high-priced real estate, she said.

“The tourist industry and second homes make such a difference in my registry,” said Normandin, who has seen her share of real estate booms and busts during her 35 years in the registrar’s office. But she recalls seeing nothing like the feverish mortgage activity of the past couple of years.

“It has been unbelievable,” she said. “A normal day for us would be 100 to 125 documents. During the recent period, it was not unusual for us to do 230, 240 documents a day.”

“I guess the only way to describe it here is in the book-and-page notes,” said Joel Dupuis, registrar for Grafton County. The books of recorded mortgages are each about 1,000 pages long, he said. “There were days we would go through an entire book and start a new one. Most of that was refinancing,” he said.

The Grafton Registry took in $505,810 in July through October in the current fiscal year, compared to $588,417 for the same period last year, he said.

“We’ll exceed $1 million,” Dupuis said, though the county will not, in all likelihood, enjoy the windfall of a year ago, when the registry office took in $1.5 million in gross revenue, leaving the county with $1 million after expenses. Leo Lessard, registrar for Strafford County, also notes that 2003 was extraordinary and that the current volume of business and revenue at the registry of deeds only seems slow by comparison.

“This year will be the second-largest year ever, and if it weren’t for last year, we’d be pretty happy with what we’re doing now,” said Lessard, who reports about a 25 percent drop in mortgage refinancing and a 2 percent reduction in the volume of real estate sales. He expects revenues to come in at about $1.7 million for the current year, compared to just under $2 million last year.

Though the number of sales in the southern part of the county, in communities like Dover, Durham and Lee, have dropped slightly, demand is moving north, where increased sales and rising property values have helped boost revenues.

“In towns like Milton, Farmington, Middleton, New Durham, you’re looking at houses in the $300,000 to $350,000 range,” said Lessard. “Ten years ago, you could buy those houses for $125,000 to $140,000. It started in the southern part of the state and it’s working its way north.”

Industry shakeout?

Real estate prices have been soaring as far north as Coos County, said James Seppala, president of Lancaster National Bank. “We used to think a $100,000 loan was pretty substantial. Now that’s a starter home up in this neck of the woods. We’re starting to see $250,000, $300,000 mortgages — something we haven’t seen before.”

But there has been a sharp drop in the number of refinanced mortgages, he said.

“Quite frankly, we’ve seen the boom end,” he said. “Over a 36-month rush we had a tremendous amount of money for refinancing. We’re seeing it slow down.”

A rise in interest rates this year is only part of the reason, he said. “We also think that anybody who wanted to refinance has got it done by now. We’re not seeing anywhere near as much as we did a year or two years ago.”

Neither is Regency Mortgage in Manchester, where company President Quentin Keefe reports his business is down roughly 40 percent from a year ago.

He attributes most of the decline to a fall-off in mortgage refinancing. “So many people have already done it. And it only makes sense if there’s going to be a real savings.”

A year ago, those savings for homeowners added up to big business for mortgage lenders.

“It was unbelievable,” said Keefe. “We did about $250 million in business. Probably 65 percent of that was refinancing.” Keefe said Regency is attempting to make up for lost revenue by finding new markets. The company already does business in Massachusetts and New Hampshire and has recently received its license from the state of Maine. A license application is pending in Florida.

“We’re trying to pick up market share by expanding the business a little bit,” said Keefe.

Mortgage business was down about 30 percent this year, “compared to the record level we did last year,” said Bruce Croteau, chief operating officer at St. Mary’s Bank in Manchester. Though the ratio of refinanced to original mortgages remains about 60-40, “it’s not a vast majority. It’s not 85-15, like last year,” Croteau said.

Interest rates actually dropped earlier in the year, he recalled, before creeping back up over 5 percent. Croteau anticipates rates on 30-year fixed-rate mortgages to go as high as 6.5 or even 7 percent in 2005.

“People have been spoiled by rates as low as our grandfathers,’” he said. “I’m reminded, having been in this business so long, that we used to think anyone with a single-digit rate was doing great.”

Croteau said he expects more of a “purchase-money market” in home mortgages next year, as the number of refinancings continues to drop, resulting in less business for New Hampshire’s growing number of lenders.

“We have over 100 mortgage lenders in Manchester alone,” said Croteau. “I think we’re going to see some of them struggle. There’s a finite amount of purchase money out there.”