New mortgages slipped 18 percent in Lucas County last year, reflecting the lowest level of home refinancing and loan activity in nearly a decade.
Since the peak of the area's interest-rate driven refinancing boom in 2003, the number of mortgages issued annually has fallen more than 40 percent, according to the county Recorder's office.
The change has forced mortgage executives to boost marketing budgets and make some cuts, but industry executives interviewed said the metro Toledo housing market is healthy despite a rising number of unsold homes.
"The purchase business remains strong," said Ralph Vinciguerra, president of Northern Ohio Investment Co., Sylvania. His firm, which last year made 1,028 loans for $105 million in Lucas County alone, experienced a boost in sales overall last year after a drop in 2004. The number of loans issued in home sales has risen both years.
Like other lenders, however, he is spending more on advertising.
A five-month-old television campaign has as its goal to "give us more brand awareness," Mr. Vinciguerra said.
Mortgages declined in other area counties with large real estate markets as well.
In Wood County, the number slipped 8 percent last year to 9,327, Recorder Sue Kinder said; in Ottawa County the number declined 12 percent to 8,193
Year-end numbers aren't yet available in Monroe County in Michigan. But through Nov. 30, they were off 8 percent, to 12,263, from the same period in 2004, according to the county's Register of Deeds office.
"I hear a lot of people saying they're slow," said Toledo mortgage executive Shane Marzullo, who is president of the northwest Ohio chapter of the Ohio Association of Mortgage Brokers.
"When we had the big refinancing boom everybody and their brother was getting into the business," said Mr. Marzullo, vice president of Greentree Mortgage Services Inc. in Springfield Township. "One day a guy was delivering pizza; the next he was a loan officer."
The number of mortgages in Lucas County fell to 27,067 in 2005 from 32,991 in 2004, the Recorder's office said. Last year was the second consecutively in which mortgage activity decreased.
The number of mortgages was the lowest since 1996, when 24,259 were filed.
Loans were valued at $11.5 billion, down from $13.2 billion. But that figure inflates the size of the local home mortgage market because it includes a handful of big financing deals involving large out-of-town corporations with local operations.
When lenders make multimillion-dollar loans, it is common for them to demand that borrowers put up buildings and equipment nationwide as collateral.
To guarantee repayment, lenders file mortgages listing the entire loan amount in every place the borrower has property.
The mortgage total in Lucas County includes deals for $820 million involving nursing home operator Mariner Health Care, $650 million involving the parent of KinderCare Learning Centers, and $644 million involving the Cracker Barrel restaurant chain.
In assessing trends in home mortgages, lenders agree that the biggest factor in the decline is the rise in mortgage interest rates to a range of 6.5 to 7 percent from recent lows of 5 percent.
Droves of homeowners with mortgages carrying high interest rates refinanced.
Home equity loans were also wildly popular.
Rather than continue to pay 16 percent a year or more on credit card balances and to finance autos and trucks at less attractive rates, owners took out second mortgages on their homes and used the loan proceeds to pay those expenses.
But as that activity has cooled, so has the region's manufacturing-dependent economy. And economic conditions may be contributing to a fall in mortgages, lending executives said.
"Some of the reasons people aren't pulling the trigger to buy a house is maybe they aren't sure what their job situation is going to be," said Ron Patton, president of the Mortgage Bankers Association of Northwest Ohio. "That is a key to our future here."
The economy, he said, will help determine whether mortgage activity continues to fall or rises in 2006, said Mr. Patton, senior vice president for lending at Toledo Area Community Credit Union.
Among mortgage lenders who have made cuts in response to the declines is Jack Howard, of Erie West Mortgage Co. in Sylvania Township.
Mr. Howard, who founded the firm 25 years ago, said he has reduced staff but otherwise decline comment on the cuts.
The most common response to the decline, however, has been to boost marketing.
"As the market contracts, competition gets stiffer," said Mike Rose, executive vice president of Sky Bank. "We need to stay in there and get our fair share." Sky is the second-busiest lender in Lucas County. The firm last year issued 2,214 mortgages totaling $363 million.
Sky had slight increases in loans made on existing homes and newly constructed homes, Mr. Rose said.
At Fifth Third Bank, the industry leader in Lucas County with 3,789 loans for $558 million last year, loans on existing homes were up 9 percent and loans for newly constructed homes rose 19 percent, said Elizabeth Kollar, senior vice president for lending in northwest Ohio.
But, as a result of a decline in refinancing, overall mortgage business in the county declined for both firms.
Charter One Bank has responded to the decrease in mortgage activity by giving branch officials more authority to issue pre-approvals on loan applications rather than automatically referring them to mortgage officials who were sometimes at off-site locations, said Michael Williams, director of mortgage banking in the firm's mid-states region.
Lending executives disagree about what will happen in 2006.
There could be a boomlet in refinancings as the short-term advantages of "zero interest rate" loans touted by lenders in recent years begin to expire and homeowners seek to lock in still-reasonable rates on conventional loans, said Mr. Marzullo, president of the local chapter of the state mortgage brokers' organization.
As long as mortgage rates remain reasonable - they are currently under 7 percent - lenders agree that a big drop in home purchases is unlikely.
Still, they plan to keep a close watch on how much or how little the Federal Reserve Board of Governors raises short-term rates and on the impact on home sales trends.
Contact Gary Pakulski at: email@example.com or 419-724-6082.