Wednesday, May 30, 2007

Mortgage market slow, not stagnant, lenders say

Companies point to relatively low jobless, interest rates

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While the residential mortgage market is ‘‘tightening up” across most of the nation, mortgage industry players in Maryland are more sanguine.

‘‘The trend is that the market has slowed nationally, said S. Lynne Pulford, senior vice president of Sandy Spring Mortgage in Columbia. ‘‘There is a large inventory of both new and resale homes. Consumer confidence due to energy prices is having an [adverse] affect on the overall market and pricing.”

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?”

Repercussionsfrom subprime 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.”

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.”

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.”

This report originally appeared in The Business Gazette.