On the Road Again

I chaired a roundtable recently at the New York Association of Mortgage Brokers annual conference in Melville, NY. The officers of NYAMB talked frankly about a market that is shrinking both in loan products to offer and qualified customers. Are you feeling the same pinch? Type in your comments below and hit enter!Besides myself and Brad Finkelstein, editor of Broker, our participants were:Richard Biondi — NYAMB president, R J B Financial Consultant, Farmingdale; Gene Tricozzi — NYAMB immediate past president, Northern Funding Corp., Clifton Park; John Common — NYAMB past president, Lynx Mortgage Bank, Westbury; Don Romano — NYAMB past president, Shelter Rock Mortgage Corp., Lake Success; and Nagy Henein — NYAMB past president, The Greater Mortgage Corp., New City.MARK: Obviously, the market’s volatility is on everybody’s mind, and we’re wondering what you think will be the effect on your operations especially with the number of wholesalers exiting the business recently?DON: The biggest problem in the right now is that the availability to place loans is shrinking, as well as the product mix is shrinking.GENE: I think it is the product availability to the consumers that is suffering a lot.BRAD: Has the lack of product availability hurt the number of consumers you can help?(The entire panel answers in the affirmative)MARK: So you have qualified borrowers having trouble getting loans?DON: Well the term qualified borrower is changing because the guidelines are changing. What was a qualified borrower a year ago today is no longer qualified.GENE: Some consumers have been in the marketplace for a while, they may have been qualified six months ago. With the changes they are now not qualified.MARK: Who do you look to, to replace the lenders who have gone out of the wholesale space?GENE: The volume of FHA business has increased a lot.JOHN: FHA in Long Island has been very limited and when the limits were raised up it changed the whole perspective.BRAD: So New York has benefited from the increase in limits?RICHARD: There are a lot of restrictions on the increased limits, although it has benefitted the new homebuyer. Some of the people who are out there looking to modify or just lower their interest rate, (FHA's) definition of who qualifies is restrictive.DON: It is also a fairly pricy way to finance, compared with what was available in the past.NAGY: It will also help the borrowers who are qualified but for one reason or another have for one reason or another have taken an option ARM, now with the higher loan amount they are able to get into an FHA loan at a fixed rate.JOHN: If you can get the house to appraise.DON: One of the biggest issues we run into in this part of the country is the lack of stated income and no income products. We are one of the highest taxed states in the nation, so anyone who is able to structure their income so their tax bill is lower takes themselves out of the mortgage market.GENE: John raises a good point, that values have been declining slightly, and for refinance business, it is making it a little more difficult.NAGY: I agree as far as declining values, but the remaining lenders have gone to a very strict review process of the value, to the point where they are actually decreasing the appraised value that is coming in that is already been depreciated.BRAD: Have home values in New York declined significantly?DON: I don't think so, at least not downstate.RICHARD: I think you have a little bit of mix on that. I purchased a home four years ago and I'm being told that the value on my home is probably 10% to 20% lower than it was and I have made some significant improvements to it.MARK: We have seen around the country where consumers are seeing home equity lines cut or revoked because house values have gone down. Is that a problem in New York?GENE: There is a tremendous problem.DON: I had a client call me a couple of weeks ago who did a piggyback when he bought the house. He paid off the second loan but left the credit line open. He did work on the house and wants to finish the work (financing it) off his credit line. As he was about to do that, (the lender) closed his line. He contacted the servicer and after several phone calls back and forth, they still wouldn't replace the line because he wasn't using a general contractor. There was no reason to put this guy through this heartache.GENE: We have a customer that has only a home equity line we put into place two years ago. His home was free and clear. The LTV on the home equity line of credit was 25% and they backed down his by $50,000. I couldn't believe it and he's totally beside himself as well.NAGY: I think the attitude of most of the lenders is that the home equity lines they have outstanding, they want them paid off, they don't want to replace them, they don't want to subordinate. I had a client with no (first) mortgage, he had a $300,000 loan and he hasn't used any of it. He wanted a first mortgage, wanted to subordinate it with the same bank. They declined it initially, but the fact that it was 25% or less LTV, we were able to reverse it. DAN: I've been going back to all my previous clients with credit lines and telling them to draw them down, get the balance up there just to have the money in cash. That is the only way you can be sure the money is available.RICHARD: I had a couple that drew down their credit line just when a lot of the credit lines were being cut, and they contacted the lender who said "no problem." They wrote the check for $50,000 because they were planning on paying college tuition and other things. They bounced the check. There is no warning, even with pre-contact. They're just closing them down, bouncing their checks and not even giving consideration for the ones that are already in transit.