How different regions of the nation are performing in terms of mortgage loan originations could very well depend on what type of customer you are marketing to.
Fairway Independent Mortgage, Sun Prairie, Wis., concentrates on first-time homebuyers, explained its chief executive Steve Jacobson. FTHBs are prevalent in all markets. Existing homeowners may or may not turn into move-up buyers, especially now that home values are not as strong as they were a few years ago, he said.
FTHB activity is skewed based on where prices are in different markets; it is a market where buyers act more on need. Because of that, Fairway's view of mortgage activity in various cities might be different than some of its competitors, Jacobson said.
The aggressive focus on FTHBs means that in certain markets Fairway is very busy. Also impacting his view is that Fairway branches are located predominantly in the South, Southeast, Southwest, Midwest and Northeast. It only has two branches in California, considered the largest mortgage market in the country.
The Northeast is one of the slower markets in the Fairway network. This market, he said, is contingent upon refinancings. For the first seven months of the year, Fairway's volume was 70% purchase.
This interview took place as the stock market began its wild swings in August, and money flowed into the bond markets, driving rates down. That is going to translate into a lot of new business in the following 60 days, Jacobson noted.
Given that housing prices in the Northeast are higher than in some other parts of the country, that has an impact on the FTHB business, he said.
Go further down the Eastern Seaboard to the Carolinas where the average loan amount is lower and thus more attractive to FTHBs, business for the company is better. Thus originators in those markets and in Georgia “are as busy as they ever have been,” Jacobson said.
Another item that can affect volume in different areas are the closing costs. In Texas, he noted, these costs are high. But in Wisconsin they are low. As a result, when the rates drop as they have in recent days you are more likely to see refi activity in Wisconsin versus Texas.
These variations are what help to make different markets unique nationwide.
Meanwhile, Scott Stern, the CEO at Lenders One, a St. Louis-based cooperative of mortgage originators, said on an anecdotal basis, the discussion at the group's recent conference found originations on both purchase and refinancings are stalling because of problems related to equity and loan-to-value ratios.
The primary areas where LTVs are a problem are the Southeast, Upper Midwest and the Southwest. This is especially true in areas where there are high amounts of foreclosures, which are driving down prices. “Even borrowers with good credit who are at interest rates higher than the market, find that they can't refinance because their homes have little, no or negative equity.
“I believe there are tens of thousands of homeowners who could be part of the mortgage process right now refinancing who are locked out of the market,” Stern said. “You can imagine the impact that has on volume, especially in the hardest-hit geographic areas.”
With rates at lowest point ever seen, he continued, the only people who could refi now are the same ones who did so six to nine months ago, the ones who live in markets not badly hit.
Not only would mortgage companies benefit from those who lack equity being allowed to refi, but the nation as a whole would benefit, because by lowering their payment, they are likely to use the extra money and increase consumer spending, Stern said.
There are two “significant factors” impacting home buying, he believes. The first is whether or not a homebuyer can get a loan if it is available. Credit is tough to come by, as underwriting guidelines have been strict.
“However, by far and away, the biggest issue impacting home ownership right now is not credit. It is psychology. It is the psychology that says 'the market is going to get worse and I don't want to buy a home now when the market is going to get worse tomorrow.'
“So consequently, you have people who might be ready and willing and able to buy, but they're saying 'I'm not going to buy yet' because the market and prices are still going down,” Stern said.
But he still continues to believe that those who want to buy a home “should run not walk” to their local Realtor's office.
