....recent observations by Mike Bower, with Mortgage America in Allentown - 610.366.2586 or email: mikebower@rcn. Mike, what are you seeing right now in the real estate, from a local lender's perspective:
Well oddly enough, even though the sales in our market are down 20% my business was up 10% in 2007 vs 2006 and on pace to be up 25% this year vs 2007. The reason for this I think is that we never really did a whole lot of Subprime loans. So when they went away it didn't cut into our business at all. Prior to 2000-2001 FHA was about 30% of the loans that we did. Between 2001 and 2006 it was about 3%.
With the changes in the mortgage industry FHA has all of sudden become very popular again. We have always been an FHA friendly mortgage company so we are actually doing very well in this market. On the other hand a lot of the banks that did bigger loans and new contruction are hurting quite a bit. They are finding it difficult to find construction perm and Jumbo business.
Brokers who supplemented most of their income with Subprime are mostly out of business and others are struggling. The biggest challenge for the mortgage industry this year is just keeping up with all of the changes. It seams like we get program change memos weekly. 100% financing has become virtually extinct unless you are a veteran or qualify for a Guaranteed Rural housing loan. Fannie Mae and Freddie Mac changed their pricing policy to include borrower FICO scores in the calculation.
Someone with a FICO score under 680 can expect to pay a higher rate on a conventional mortgage regardless of their down payment amount. FHA does not have this requirement which is another factor in it's sudden popularity. The latest challenge was the declining market policy implemented and then retracted by Fannie Mae. It basically required homes in a "declining Market" to have a minimum of 5% down. Since they retracted this policy they have decided to cancel all 97% loans as a general rule, eliminating the need for the "declining Market" policy.
Rates have been extremely volatile this year! It seams that they either > go> up or down every day, sometimes as much as two or three times throughout the day. I have never seen the rates this volatile in my 15 years in this business. Mortgage rates change as Fannie Mae mortgage backed securities are sold. The price of these securites is affected by many economic and geo-political factors. In the last couple months the rates have been going down on bad economic news (unemployment numbers and recession talk) and up on inflationary news (high gas/ oil prices).
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment