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  • Senior Loan Officer Scott Sheldon, left, and Notary Kenya George help Balvir and Rajbinder Sidhu sign loan papers at W.J. Bradley Mortgage Capital Corporation in Santa Rosa, Calif., on December 18, 2013. (Alvin Jornada / The Press Democrat)

For 2014, the home mortgage industry is expecting higher interest rates, fewer home refinance loans and the rollout of new consumer protection rules from an agency that Congress created after the housing market meltdown.

Both home prices and the cost of borrowing likely will rise again next year, said Dustin Hobbs, a spokesman for the California Mortgage Bankers Association. But with the industry expecting a sharp drop in home refinancing, the state's banks, mortgage brokers and credit unions will be courting qualified borrowers.

"You're going to have a lot of good competition from lenders to get your business," Hobbs said.

Many local loan officers and bank officials say the home lending business has been strong for the past two years.

"Even now, there's still a demand for money," said Scott Sheldon, a senior loan officer with W.J. Bradley Mortgage Capital Corp. in Santa Rosa. He said he fielded seven requests for new loans in the week before Christmas.

However, the refinance market began to slow last summer and is expected to plummet in 2014.

The Mortgage Bankers Association predicts mortgage originations nationally will decline 32 percent overall next year to nearly $1.2 trillion. The association estimated that new purchase loans will increase 9 percent to $723 billion, but refinance loans will drop 57 percent to $463 billion.

Rising interest rates are the main cause behind the refi plunge. In June, the average rate for a 30-year fixed loan jumped above 4 percent for the first time in 20 months, according to Freddie Mac.

"The minute interest rates stop declining, then the quantity of refinances drops dramatically," said Otto Kobler, branch manager in Santa Rosa for Summit Funding.

Lenders also noted that most people who were interested in refinancing already have done so in the past four years.

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