The national mortgage crisis was great enough to pressure President Bush into signing the Housing and Economic Recovery Act last week, but the local market appears resilient, according to area mortgage financiers.“I would emphasize one thing: People do not need to be pessimistic about it,” said loan officer Brad Bumgardner of Money Time Home Mortgage Corporation in Talladega. “That hurts more than the actual market does.”
J.T. Malone of Maximum Mortgage Services Inc. in Talladega said he has seen only a slight increase in the number of home foreclosures locally, and it seems unchanged from the climate three years ago.
Cathy Markert, a mortgage loan officer at SouthFirst Bank, said potential home buyers have no cause to be fearful, because the number of local foreclosures has not plummeted with the national numbers. Markert said this is because the local market has not engaged in lending practices that were not as lenient as some in other markets.
Bumgardner said he thinks the number has indeed spiked a little, but the blame belongs only partially on the doorstep of adjustable-rate mortgages (ARMs).
“It’s like everything else, business flows in and out like the tide,” he said.
And the tide seems to be drifting toward more Federal Housing Authority loan programs.
“The government is trying to help the consumer to continue to buy homes but also to correct the errors that have taken place before, and this should not scare off potential home buyers,” Markert said.
Bumgardner said the mortgage market was in dire need of a correction along the lines of what it is receiving right now.
Indeed, loosening standards are what caused the current situation. Local lenders agree the restrictions are the medicine for the market: a little bitter, but terribly good for us.
“The overall mortgage industry will be healthier with these tighter requirements,” Malone said.
It may be more difficult to qualify for a loan right now because of higher down payment requirements, but on the upside, the tighter restrictions give people more protection than before from things like ARMs.
“ARMs are not something anyone should want to consider,” Bumgardner said. “You can’t budget your house payment when you don’t know what it’s going to be next month. You’re setting someone up for foreclosure if you set them up with an ARM.”
Markert, Bumgardner and Malone all emphasized the need for potential home buyers to be educated about their options and the consequences of each one.
Current down payment figures for mortgage programs range from 3 percent for clients with good credit to, 5 percent for clients with more damaged credit. But the new restrictions and higher down payments are going to make the industry healthier, Bumgardner said, because homeowners will have more invested in their property and will therefore be less willing to foreclose. The higher down payments also help clients in the long run by allowing them to make smaller monthly payments.
“Over time it’s going to stabilize the mortgage market, because it’s going to hopefully have people buying homes that truly have the financial wherewithal to put down a down payment and make the monthly payments on time,” he said.
However, for those who need 100 percent financing, Markert said they can still receive it through a program with the Alabama Housing Finance Authority in partnership with approved banks.
Although the restrictions on residential mortgages are tightening, potential homeowners ought not to despair. Malone said he senses a local fear factor, but he would encourage people to seize the opportunity to buy a home.
In fact, for those with good credit who want to purchase a home, now is “a golden opportunity for people to buy,” he said.
Bumgardner’s assessment echoed that. He recommended people with decent credit and the means to make mortgage payments to go ahead and purchase a home.
“First of all, it is absolutely a buyer’s market,” Malone explained. “Second, interest rates are still very attractive. Third, the terms … have not been affected by all this going on.”
And real estate is selling at some tantalizing prices.
Another element in buyers’ favor: In historical context, interest rates are great, hovering right around 7 percent.
And Malone emphasized the permanency of real estate property.
“The real estate market is not going to go away,” Malone said. “[It] is such an integral part of our economy that people should realize that all of this is going to work out and this whole thing is going to become just a bad nightmare that we’re all going to live through.”
