Watch the tragic news!
Lately I seen several articles from prominent industry news sources, painting a negative picture on what’s happening out there; when actually it’s improving in a major way (we have the lowest 30 year fixed rates in all of YOUR life-time)! Here’s part of on I saw this last week … " How’s the mini-refi boom holding up? One rank and file retail LO for a top ten ranked lender — who requested his name not be used — told us he’s getting "lots of calls" on refinancings via the company’s 800-number. But it’s not a slam dunk by any means. The biggest problem with the applicants who are looking to refinance is "not enough equity," he said, "or poor credit." I believe pieces like that are counterproductive and not good for our industry, especially coming from serious journalists!
I’m explaining my feelings about this, day before yesterday to my friend Rick Grant (a former Editor of a few well known publications and a major industry reporter I’ve known 20 years). I told Rick, ya know what Rick? That young man probably hasn’t even spoken to 50 inbound potential borrowers in all of the last 6 months, and now that only a small handful of them DO qualify, he’s whining! ‘How silly’ I say. All of his career he’s had potential borrowers that were ‘rejects’ – so what’s different today … except that his phone is ringing off the hook with potential cusutomers and his dream of closing them all isn’t being fulfilled – and to top it off, his narrow self-centered views are being published nationally! Potentally infecting other originators with that same short-sighted point of view!
So Rick tells me, ‘Peter imagine you’re watching TV and you hear a news teaser that say "500 planes landed safely at LAX today, stay tuned for film at 11" How many people would watch that, he asked me? It’s the ‘NEGATIVE that sells newspapers’ – that’s why you hear "an airliner slid off the runway, exploded and landed in a ditch, watch film at 11!
BTW, my forecast is 2009 will be much better than 2008 for our industry, with the return of non-prime/subprime/non-conforming/Alt-A wholesalers no later than late Summer ’09.
Here’s hoping your forecast is on the money, Peter! Keep your chin up.
Rick.
Comment by Rick Grant — January 9, 2009 @ 4:48 pm
Thanks Rick! From all I read eveyday I see quite a few symptoms that my forcast is likely pretty close to being correct. That of course assumes our new President works toward improving the economy (at glacier speed like the government normally moves – but none the less in the correct direction).
All those institutional investors (former aggressive secondary market players) can’t sit on the sidelines (and just earn Treasury yields) too much longer – nor can the ‘tens of millions’ of non-prime homeowners ‘sit tight’ either :-}
Comment by Secret! — January 10, 2009 @ 8:15 am
I agree that SubPrime and Alt-A will return soon. The yields are just too tempting and the market too large to think otherwise. However, I think those that re-enter the non-comforming market will do so initially at the 75-80% LTV range as a maximum. As the housing market eventually stabilizes and values start increasing slightly (probably still 12-15 months away), we may see some LTV increases. However, the completely inane underwriting guidelines that existed previously in non-conforming will never return. Ability to repay will be highly scrutinized and solid valuations will be required. Having appraisals ordered by Lenders rather than Brokers will eliminate the fudge factor often seen in appraisals.
Although perhaps a bit counter-intuitive, I also see FHA getting more aggressive in their underwriting. There will be a lot of political pressure to keep lower income borrower’s in their homes. The loosening of guidelines will almost certainly result in higher MIP’s to offset the additional risk.
Comment by Dave — January 10, 2009 @ 5:46 pm
Except for your FHA remark, I totally agree wth you Dave. All the non-professional originators that were thankfully heading out of the industry, made a short stop at FHA this past year; Im sure they have infected it will loads of near-term problems. I see FHA having increasing deinquencies and losses (naturally growing MIPs to pay for them), but no expansion there, only a conraction back to the ‘itty bitty tiny’ slice of originations FHA has been historically.
I appreciate you insight on my blog Dave … you’ve got a good head on your shoulders!
Comment by Secret! — January 11, 2009 @ 7:39 am