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VOL. 124 | NO. 72 | Tuesday, April 14, 2009

Q1 Mortgage Numbers So Predictable

By Eric Smith

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With home sales continuing their dramatic decline, it stands to reason that mortgage activity would mirror the sales slump and register its own set of disappointing numbers.

That logic certainly prevailed in the first quarter of 2009, which saw a significant dropoff in residential mortgages, according to the latest data from real estate information company Chandler Reports, www.chandlerreports.com.

Banks and mortgage companies made just 1,621 residential mortgage loans January through March, down 40.6 percent from the 2,729 made in Q1 2008 and down 61.4 percent from the 4,202 in Q1 2007. (For this report, only mortgages taken at the time of sale were counted; refinancings were not included.)

Chris Bowers, senior mortgage loan officer at Renasant Bank and immediate past president of the Memphis Mortgage Bankers Association, said the mortgage industry is contending with issues that have affected numbers in various ways.

“One of the big stories has been the sustained low rates in the market with the combination of tightening of guidelines and lessening of values,” he said. “How that has impacted both purchase money and refinance is that on purchases if you’re in a position to buy, there’s really not been a better time to buy … .”

Buyers’ market

On the refinance side, while the declining value of homes has proven to be a hurdle for some, many homeowners are saving money by refinancing their loans, noted Sam Goff, mortgage loan originator at Evolve Bank and Trust and president-elect of MMBA.

“There’s an awful lot of people that can save money by refinancing, and a lot of people have been sitting on the fence waiting for this 4 percent (interest rate) that they keep hearing in the press that many of us don’t believe will ever happen,” Goff said. “I think people are coming to realize that that’s not going to happen and they’re getting off the fence. I dare say 70 percent of homeowners today could save money by refinancing.”

Though refinancing activity wasn’t tracked for this article, the refinance numbers nationwide have improved. That topic has proven to be one of the chief storylines for the mortgage industry in 2009, as the year began with a refinancing boom that hasn’t slowed down too much in the past month, thanks to low rates.

That, in turn, has sparked some purchasing activity, with March faring better in mortgage numbers than the previous two months of 2009.

West Beibers, president of Delta Trust Mortgage Corp., said business has been pretty good for the first quarter, first on the refinancing side and then on the purchase side. But, he added, factors outside the world of lending guidelines and credit scores are affecting the overall mortgage activity.

“We’re seeing a spring thaw and the purchasers seem to be back,” he said. “The biggest wildcard that’s out there still, just like the rest of the country, is the job situation. With reports of FedEx laying off 500 people, that’s not helpful.”

On the bright side

If there was a positive that came out of the mortgage counts from Q1, it’s that the average mortgage amount increased from the same quarter a year ago. Mortgages in Shelby County averaged $147,412 last quarter, a 3.2 percent increase from $142,844 in Q1 2008 (although a 1.5 percent decrease from $149,696 in Q1 2007).

But the total mortgage amount in terms of dollars plummeted compared to the previous two quarters. Q1 2009 generated $239 million, down 38.7 percent from $389.8 million in Q1 2008 and down 62 percent from $629 million in Q1 2007.

Among loans, 20.8 percent of them were for less than $50,000; 62.1 percent of them were between $50,000 and $249,999; 16.2 percent were between $250,000 and $499,999; and 1 percent of them were more than $500,000.

The top lender in Q1 in terms of dollar amount was Magna Bank, formerly known as 1st Trust Bank for Savings. The company has been one of the top mortgage producers in Shelby County over the past year, ranking No. 1 in Q4 2008 as well.

Magna Bank last quarter made 124 mortgages averaging $168,680 and totaling $20.9 million. It was followed by Community Mortgage Corp. (151 loans, $134,708 average, $20.3 million total); SunTrust Mortgage Inc. (86, $195,682, $16.8 million); Regions Bank, doing business as Regions Mortgage (86, $150,729, $13 million); and Wells Fargo Ltd. (65, $179,096, $11.6 million).

In other stats from Q1, Federal Housing Administration loans were up 79.7 percent compared to the same quarter last year. There were 733 FHA loans last quarter, or 45.2 percent of the 1,621 made. In Q1 2008, there were 416 FHA loans, or 15.2 percent of the 2,729 made. And in Q1 2007, there were 142 FHA loans, or 3.3 percent of the 4,202 made.

Factors such as the increase in refinancing figures, low rates and consistency from FHA products have mortgage bankers cautiously optimistic about the health of their industry moving forward.

“We very firmly believe that come late spring, early summer, that you’re going to hear hammers pounding and saws sawing,” Goff said. “I think the construction market will start picking up again because there are just too many good buys in the marketplace today and the rates are so low.”

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

PROPERTY SALES 85 205 21,165
MORTGAGES 76 206 24,338
BANKRUPTCIES 46 90 13,558