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E*Trade's Portable Mortgages

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By Rex Moore (TMF Orangeblood)
June 10, 2003

It's one of the most innovative features to hit the U.S. lending market in years, and it's coming from Internet success story E*Trade Group (NYSE: ET): Get a new mortgage at today's low rates, and take it with you when you sell your home.

Instead of paying off an old loan when selling and then getting a new one at possibly higher rates, "Mortgage on the Move" will allow sellers to transfer the terms of the loan to their new residence. If they move to a more expensive home, they'll have to take out a mortgage at prevailing rates to cover the difference. If stepping down to a less costly dwelling, payments will be recalculated to match the balance.

E*Trade's portable mortgages are not available to those who are refinancing. As The Wall Street Journal reports today, lenders -- fearful of a big drop-off in refinancing activity once rates begin to climb back up -- are doing all they can to strengthen relationships with realtors and builders who can give them new buyer referrals. Lenders such as J.P. Morgan Chase (NYSE: JPM) and ABN Ambro (NYSE: ABN), for example, offer lower rates for new loans.

As the Mortgage Bankers Association's Doug Duncan told the paper, "There's an increased unease among lenders that the bigger this refinance boom gets, the bigger the drop-off will be at the end of it." E*Trade is doing its part to prepare for any turbulence. Though the portable mortgage idea didn't originate with them, give them credit for being the first to implement it nationwide.

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