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VOL. 123 | NO. 156 | Monday, August 11, 2008

July Mortgage Activity Drops 37 Percent

By Eric Smith

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The federal housing bill recently signed into law might bring relief to the beleaguered mortgage industry, but it likely won’t bring results for a few months. In the meantime, the real estate market sputters along and lenders struggle to keep pace with last year’s numbers.

Shelby County saw another month of decline in lending, with mortgage activity falling 37.5 percent in July compared to the same month a year ago, according to the latest Lender Analysis by real estate information company Chandler Reports, www.chandlerreports.com.

Just 1,020 residential mortgages were made in the county last month, down more than a third from the 1,633 made in July 2007 and down 9.2 percent from the 1,123 made in June.

Moreover, the average mortgage amount in July was $160,268, down 2.6 percent from $164,545 in July 2007 but up 4.6 percent from $153,186 in June. The total dollar volume for the month was $163.5 million, down 39.2 percent from $268.7 million in July 2007 and down 5 percent from $172 million in June.

Reversal of fortune?

The Housing and Economic Recovery Act of 2008, which Congress passed and President Bush signed late last month, should begin to reverse those trends, although how much of an impact it will have remains to be seen.

Some of its features include helping debt-ridden homeowners, strengthening Freddie Mac and Fannie Mae, providing help to communities hit hard by foreclosure and giving tax credits to first-time homeowners.

Chris Bowers, mortgage loan officer with Bank of America and president of the Memphis Mortgage Bankers Association (MMBA), said the elimination of seller-funded down payment assistance programs will have a negative effect, but he ultimately sees some of the measures, such as the tax credit, as positives.

“There are going to be a lot of changes that are yet to fully have been digested by the industry,” Bowers said. “This bill was enormous in its volume – it was 780, 790 pages of information. I think in the long term there’s going to be a lot of good from this law. We just have to digest it and see how we apply it.”

Sam Goff, mortgage loan originator for Evolve Mortgage and MMBA vice president, said the bill has been a hot topic around the office, and that most people see it as a good move.

“Is it going to help? Certainly. Is it going to be the panacea? No,” he said. “But it is going to help more people get into homes, and anything that is good for the individual is welcome – absolutely.”

No easy money

Getting more people into homes is typically the goal of mortgage companies and banks, although that’s precisely what got those industries into trouble with the rise of subprime lending.

“There were loans being made to people that loans shouldn’t be made to,” Goff said. “We’ve always had the concept that fast and easy wasn’t always the best thing for the client.”

The latest figures reflect how the fast and easy money is no longer available, as most lenders in July showed declines from the same month a year ago.

The top residential lenders for the month in Shelby County in terms of total dollar volume were First Tennessee Bank NA with 75 mortgages totaling $13.6 million; Wells Fargo Ltd. (67, $12.3 million); Magna Bank formerly known as 1st Trust Bank for Savings (59, $11.5 million); SunTrust Mortgage Inc. (43, 9.4 million); and Bank of America NA (54, $7.8 million).

Looking at the year-to-date figures, Shelby County has seen 6,735 residential mortgages in 2008 through the end of July, down 33.8 percent from the 10,176 in the same period of 2007 and down 43.6 percent from the 11,947 in the same period of 2006.

The average mortgage amount for 2008 is $150,359, a 3.4 percent decline from $155,603 in 2007 and a 1.7 percent decline from $152,882 in 2006.

Clearly, credit and confidence issues are plaguing the mortgage landscape, and only time will tell if they can be remedied.

“It’s not that instant, easy money that was available just a year ago,” Bowers said. “And we’re not going to see that again anytime soon. It’s going to take some time for the market to get calm with our industry again.”

The Associated Press contributed to this report.

PROPERTY SALES 97 418 8,253
MORTGAGES 112 508 9,293
BUILDING PERMITS 194 1,059 18,126
BANKRUPTCIES 46 208 5,367