October Mortgages Plummet 33 Percent

By Eric Smith

Although his term as president of the Memphis Mortgage Bankers Association (MMBA) extends two more months through the end of 2008, Chris Bowers can begin to reflect on what has been a tumultuous year in his profession.

“It’s definitely been a wild ride,” Bowers said. “I didn’t think that when I came into office – even though the process had already begun as to the reshaping of our industry – anyone could have foreseen the level and the extent of which this industry would change.”

Changes in the mortgage industry came after subprime lending spiraled out of control and crippled the housing market. And it sparked a steady decline in mortgage activity dating back to 2007, when the first wave of subprime loans began to wreak havoc on borrowers and lenders.

The woe continued in October as Shelby County saw just 818 mortgages, a 33.3 percent decline from 1,227 in October 2007, according to the latest Lender Analysis report from Chandler Reports, www.chandlerreports.com. (The report includes only new noncommercial mortgages taken at the time of sale and does not include refinances.)

October’s average mortgage amount of $143,720 was 7.8 percent less than September’s average of $155,929 but just 1.8 percent less than October 2007’s average of $146,314. Mortgage activity for October in terms of total dollar amount was $117.6 million, marking a 34.5 percent dropoff from the October 2007 total of $179.5 million and a 14.5 percent dropoff from the September total of $137.5 million.

Shrinking market

While Bowers chalks up most of the October decline to the slumping market, he also noted that some of it stems from the season, making matters worse.

“As winter starts coming around the corner, we typically see that October, November, December, January and February can be a little slower,” Bowers said. “There may be some steadying out there. There are definitely some properties selling. But we’re all just competing for a smaller piece of a market.”

A smaller piece of the market has been the theme for 2008. Year to date, there have been just 9,381 residential mortgages in Shelby County, a 33.6 percent decline from 14,130 for the same period in 2007. This year’s numbers also mark a staggering 46.5 percent decline from 17,521 for the same period in 2006.

And while this year’s average mortgage amount of $150,545 is close to the 2007 average of $154,658 and the 2006 average of $152,667, the total dollar volume of $1.4 billion is 35.4 percent short of last year’s $2.2 billion and 47.2 percent short of 2006’s $2.7 billion.

The top lender in Shelby County in October in terms of total dollar amount was Community Mortgage Corp., which made 67 mortgages averaging $128,513 and totaling $8.6 million.

It was followed by Magna Bank (47, $175,288, $8.2 million); SunTrust Bank (51, $148,871, $7.6 million); Wells Fargo Ltd. (38, $181,873, $6.9 million); and Pulaski Mortgage Co. (29, $165,901, $4.8 million).

Get to work

Meribeth LaBarreare, vice president and senior loan officer for Magna Bank, is the president-elect of MMBA. She was installed into office at a ceremony last week, although she won’t officially take the reins until Jan. 1, 2009.

LaBarreare mentioned some of the talking points she had prepared for last week’s acceptance speech, which revolved around the ever-changing mortgage industry. As she noted, today’s landscape is a far cry from three or four years ago when seemingly every applicant who wanted a home got one.

“If you were breathing, there was a loan for you. It didn’t matter,” LaBarreare said. “That’s why we’re in the crisis that we are because everyone got creative in the 103-percent and ARM (adjustable-rate mortgage) loans. I think now it’s back down to the basics. We have to work again. We’re back to a full-time job again.”

LaBarreare also pointed out that lenders fell by the wayside once their subprime products were no longer viable, leaving only the traditional banks and mortgage companies.

“We’re calling it the ‘flight to quality lenders,’” LaBarreare said. “Now we’re back to the days where how you treat your customer and the service that you give them is what’s going to matter. It’s not about the product anymore.”

While it’s important to note that mortgage dollars still exist, and that qualified borrowers get loans every day, the days of easy money are long gone. Bowers said measures implemented from the recently passed Housing and Recovery Act and financial bailout packages might help banks and mortgage companies adapt to the changing market, but otherwise they face a “new reality” of tightened guidelines.

“This is how it’s going to be for a while,” Bowers said. “It’s going to be slower, more conservative and managed in a better risk scenario. It’s going to be a long time before we see 100-percent loans being the regular norm.”

Chandler Reports is a division of The Daily News Publishing Co.