Mortgage market is slow, not stagnant, lenders say

Companies point to relatively low jobless, interest rates

Not so in Maryland, Pulford said.

‘‘It appears that the Maryland market is stronger than others due to the base realignment and the net gain of new jobs and households flowing into Maryland,” she said, referring to the Pentagon’s Base Realignment and Closure process, which is expected to bring tens of thousands of jobs to the state.

‘‘We’re seeing strong numbers for mortgage and refinancing applications in Maryland,” said Charles DiPino, president of the Maryland Association of Mortgage Brokers and owner of Universal Trust Mortgage Corp. in Columbia. ‘‘It’s good to buy now. The weather has broke, housing prices are low and mortgage rates are good.”

Maryland’s unemployment rate, lower than the national average, is making a difference, he said.

‘‘Maryland is faring better than the rest of the country,” he said. ‘‘We’ve got a strong employment rate — nearly full employment. Incomes are strong in Maryland, and I think that will continue.”

The low jobless rate and strong economy can be traced to geography, says Cary Reines, executive vice president of Mason Dixon Funding in Rockville.

‘‘Maryland benefits from its proximity to Washington, D.C., and federal government jobs,” Reines said. ‘‘The government is a big employer, and an employer that pays well. That makes a big difference in giving people the ability to afford housing.”

Reasonable mortgage rates are also a factor, Pulford said.

‘‘Long-term rates are still very favorable and continue to be in the low 6 percent range in Maryland as well as in the rest of the country,” she said.

‘‘Mortgage rates are excellent,” agreed DiPino. ‘‘They’re on a historic low end. And if the Fed lowers rates further, it’ll get even better. If we see rates stay low over a little time, we may soon see another real estate and refinancing boom. Wouldn’t that be nice?”

Repercussions fromsubprime market

Still, the home mortgage market is nowhere near where it was two years ago, many say.

‘‘There’s been a tightening in the subprime market, and Wall Street is not buying loans as much as it did,” DiPino said. ‘‘That’s hurt some customers. It’s really based on the real estate business. People are nervous. They’re not willing to take on a riskier loan. They want facets that are locked down. Housing values are stabilizing now, and they’re scrutinizing values more.”

According to Michael Galeone, executive vice president of The Columbia Bank, the subprime market was ‘‘abused” during the mortgage boom of two years ago.

‘‘The subprime market got into trouble as lenders began lending to people with less-than-sterling credit qualifications,” he said. ‘‘Sub-prime lending lets you borrow based on the value of your home, maybe up to 125 percent of the value. The trouble happens when the market goes against those people.

‘‘People bought more than they could afford,” he said. ‘‘In the past, they could buy an $800,000 house at 3.5 or 4 percent interest. Then the market shifted and their monthly payments doubled. Many people didn’t have the cash to cover it, and they’re struggling.”

Galeone called subprime lending ‘‘a ticking time bomb. It creates a great potential for failure and can lead to high foreclosure rates.”

Lenders, Galeone said, have scaled back their marketing efforts in residential mortgages and have returned to more stable lending practices.

‘‘We lend prudently in the areas that we can,” he said, ‘‘such as commercial lending. We could generate more loans if we wanted to [approve riskier loans], but we’re more prudent.”

Subprime customers who took out interest-only payment and adjustable rate mortgages have run into foreclosure problems, Galeone said.

‘‘Foreclosures are accelerating,” he said. ‘‘People have seen their monthly payments double or triple as rates have gone up, and they’re finding it hard to continue to meet their obligations.”

Foreclosures in the first quarter of 2007 totaled 2,031 in Maryland, up 88 percent from last year’s first quarter, according to RealtyTrac of Irvine, Calif., which monitors the industry.

‘‘In the last few years, you had a lot of people who were not really qualified to buy a house buy a house anyway,” Reines said. ‘‘Now they’re finding out that they can’t afford to keep them. We’ve seen a lot of that in the last six to nine months.”

Not everyone thinks foreclosures are a serious problem.

‘‘I don’t see it as a problem in Maryland right now,” DiPino said. ‘‘Lenders are willing to help mortgage holders and homeowners. They’re willing to work with customers to get them to stay in their homes. Foreclosures are bad for everyone involved.”

With the mortgage market less active, some lenders are simply waiting out the market or resorting to new marketing tools.

‘‘Lenders are employing different types of marketing strategies depending on their client base and type of loan products they offer,” Pulford said. ‘‘Some of the strategies we’ve been seeing are direct mailings and soliciting prior clients.”

One marketing tactic causing controversy in the mortgage lending community is called credit trigger marketing, which targets consumers who experience activity on their credit report.

‘‘It’s a disturbing trend,” DiPino said. ‘‘Credit bureaus are selling leads to mortgage companies, who would then contact the consumer to offer other deals. The trouble is, you don’t know what information the credit bureaus are selling.”

DiPino likens the practice to hunting.

‘‘They’re just waiting for the customer to have his credit report pulled, for whatever reason. Then they pounce,” DiPino said. ‘‘Consumers certainly have the right to shop their mortgages, but not to be preyed upon.”

The refinancing market has slowed down, too.

‘‘Refinance activity is not as brisk as it was a few years ago,” Pulford said. ‘‘People are still refinancing for needs such as education and home improvement, but it is not rate-driven, except for those clients wishing to get out of an adjustable-rate mortgage and into a fixed-rate product.”

According to DiPino, most consumers are satisfied with the terms of their current mortgage contacts, and that has reduced the number of refinances.

‘‘A lot of people are happy with their interest rates,” he said. ‘‘Even so, we’re also seeing plenty of refinance applications.”

‘‘The refinancing market has declined, but not terribly,” Reines said. ‘‘You’re seeing a decline in housing values. Houses just aren’t going for the same prices that we’ve seen in the last couple of years. The values have dropped, and that affects the refinancing value.”