Local lenders share views on area mortgage market

by Maria G. Hoover

SBJ Contributing Writer

Some local mortgage lenders say that although interest rates have risen recently, it's still a good time to buy a house.

Dana Elwell, vice president of Guaranty Federal Savings Bank, said since April, interest rates have gone up about 1.25 percent on 30-year, fixed-rate mortgage loans. In April, he said, mortgage interest rates were at about 6.75 percent, and now they're around 8 percent.

However, he added, it's important that prospective home buyers realize the lower rates of the last few years are abnormal.

"What we have to work on now is buyers' expectations. Some expect the 6 and 3/4 percent rates, especially if they haven't been in the market long," Elwell said. "But those who have been watching know the 8 percent rates aren't bad."

He added that although interest rates may play into the general attitude of prospective home buyers, rates aren't usually the main factor.

"People want to move into a bigger house, or they rent and want to own, or they're relocating from another town or state," he said.

Tommy Ridenhour, branch manager of Carl I. Brown Mortgage, a division of FT Mortgage Companies, agreed that more than just interest rates affects selling houses. He should know Carl I. Brown was recently rated the top mortgage provider in the Springfield area for the first half of 1999 by Rocky Mountain Statistics, an independent reporting agency based in Salt Lake City, Utah.

"We've gotten so big in some categories, FHA, VA and USDA, that one out of every three people (in this area) who get a government loan get one from us," Ridenhour said.

He said the increased interest rates haven't affected business much at the company.

"Over here, the effect has been benign. Last year, there were record-setting interest rates, in that they were lower than they'd ever been in the previous 30 years. Our business has only fallen off around 7 percent from the record year, so (the effect) was not as significant as one would think," Ridenhour said.

He added that the approach at Carl I. Brown has a lot to do with the firm's success.

"What we've done is become real good at consumer and referral marketing, he said. "I don't just take people and say 'thank you for your home loan.' When they come through the door, I see as many as five loans, including one or two refinances, as well as pulling equity," he said.

In addition, Ridenhour uses a customer care program to keep in touch with his clients, and a Homes Magazine call-capturing system, both of which he recently discussed in more depth for an article in Mortgage Originator magazine.

Charles Gottas is president and chief executive officer of Systematic Savings and Loan in Springfield, a real estate lender for 76 years.

He said interest rates are always changing, never static, and in his opinion, it's always a good time to buy a house, because waiting has costs for the prospective homeowner, like loss of equity, loss of income-tax deductions and missing out on the pleasure and experience of owning a home.

"I think a good time to buy a house is anytime you can, because it's going to take you 15, 20 or 30 years to pay for it," Gottas said. "If rates are down, good, but again, why wait? Because (waiting) only puts you that much closer to retirement when you get the loan paid off."

Regardless of interest rates, credit is an important factor in whether someone is able to obtain a home loan. Ridenhour said Carl I. Brown only works with people who have good credit and good job stability, but Elwell said there are some lenders who will work with those who have credit problems.

"They've opened up opportunities for people (with less than good credit) to go ahead and buy homes, but they can pay a pretty good penalty 2 to 5 percent higher interest rates," he said.

Elwell added that if people can buy a home and establish a good payment history, sometimes they can refinance with lower interest rates. However, he said, some lenders have prepayment penalties, so homeowners should check before refinancing.

Gottas said Systematic Savings and Loan doesn't focus on credit ratings, but looks at each loan application individually in terms of the probability of collection on the loan. He said all home buyers are treated equally at Systematic, so no one pays a penalty for their credit history.

When lenders make home loans, sometimes they have to deal with failures, which means they have to foreclose on properties. Gottas said one advantage consumers have in working with a totally local lender is that sometimes, foreclosure can be prevented.

"People have economic ups and downs, but if they come in and tell the truth, talk to us, maybe we can work with them," Gottas said.

Elwell said Guaranty Federal has had some delinquent mortgage customers, but few foreclosures.

"In a good market like we've seen the last several years, foreclosure rates are pretty low because people can generally sell their homes in a reasonable amount of time ... before foreclosure," he said.