With much help from Long Island house hunters, the State of New York Mortgage Agency expects to bump up against its 1999 record year for financing home loans.

Below-market interest rates have help flood SONYMA with 564 applications in the first two months of this year, the agency said.

Spring, the prime buying season, hasn't even sprung, so at winter's high pace, the agency is set to finance 3,600 mortgages, or about $530 million in mortgages, officials said.

Also, the fees that lenders get on SONYMA loans have risen recently, from 1.75 percent to 2 percent, said George Leocata, SONYMA vice president.

The agency usually gives below-market rates for first-time buyers and those who haven't owned homes for at least three years.

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Right now for 30-year loans, the fixed interest rate is 4.75 percent for one- to two-person households with a maximum income of $122,160; it's 4.125 percent for incomes of $71,260 and under. The average rate being offered by lenders was 5 percent, according to bankrate.com.

Long Island's share of the applications has been higher than usual, Leocata said.

In the past five years, the Island has accounted for 11 percent of the closed deals and 20 percent of the mortgage funds, he said. But this year, as of Thursday, Long Island borrowers put in 23 percent of the applications -- some won’t be approved -- or about 30 percent of the requested loan amounts, he said.

This increase in a high-cost housing area stems from a mix of factors -- lower home prices, historically-low interest rates and the federal home buyers' tax credit, which expires at the end of April, the SONYMA executive said.

"I've even been hearing about people getting into bidding wars again for homes on Long Island, that open houses are really being well attended," Leocata said. "People put their houses on the market and they're getting offers on the first day."

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Real estate agents have said they've seen a few bidding wars, primarily on the entry-level market, fueled by the federal tax credit and its upcoming deadline.

The state agency has been able to lower the cost of borrowing recently due to a massive federal effort to stabilize the housing market and the economy.

The federal government is buying housing bonds that state housing agencies sell to support their programs. In November, the U.S. Treasury Department agreed to buy $665.2 in bonds from SONYMA and the New York State Housing Finance Agency. About $389 million of the bonds would be reserved for single-family mortgages.

SONYMA does not directly fund loans. Instead, certain lenders offer mortgages with SONYMA terms, and after reviewing them for flaws and fraud, the state agency agrees to buy the closed loans from the lenders. That frees up capital for lenders to make more loans.

The state agency holds and services the loans. Leocata said borrowers that are at least 60 days late make up 2.5 percent of the loans. That's a low default rate in the lending industry.

For details on SONYMA mortgages and participating lenders, go to nyhomes.org.