Mortgage lenders report strong market continues

Springfield mortgage lenders report that business is good despite recent increases in interest rates.

Tim Rebori, president of Advantage Home Loans Inc., said that while interest rates are the highest they've been in the last year and a half to two years, they're still historically low.

"Interest rates have been significantly higher in the past," he said. "Currently, 30-year fixed-rate loans are fluctuating from the low to mid 8 percent range. The rates seem high now because we were used to abnormally low rates over the last couple of years."

Tommy Ridenhour, branch manager at Carl I. Brown Mortgage, said his company is very busy, writing approximately 115 loans for more than $9 million in purchases in the last month alone.

"We're up 16 percent over February, and have seen a 51 percent increase during the January to March period," he said.

"We look for a very good year because January and February are typically weak and March isn't usually this strong, either," he added.

Dennis Vance, vice president of Mid-America Mortgage Company, said his company isn't slowing down, either.

The company's seven branches, all over Missouri and Illinois, have serviced $200 million in loans, according to its December 1999 statistics.

"I'm pleasantly surprised," Vance said. "The rates don't seem to be slowing people down. But I think we're typical in that. Business doesn't seem to be slowing down for a lot of companies."

However, Vance added, he has seen more customers looking at adjustable rates as an alternative to fixed rates.

"An adjustable rate is one that's adjusted up or down after the initial lock-in period of time, like two, three or five years," he said. "After that, the loans can be adjusted up or down."

Vance said an adjustable rate is good for young people who may eventually move up and buy a bigger home or for someone who moves frequently because of their job.

"The adjustable rate is not for everyone," he said. "Some people aren't comfortable knowing the rate can go up or down."

According to local lenders, one factor in the continued strength of the home-loan market is increased availability of home loans to a broader range of clients.

"Loans fall into three basic categories: conforming, which is for those with good credit; government loans like those of the Federal Housing Administration or Veterans Administration; (and) nonconforming loans for people who have declared bankruptcy, have a high debt-to-income ratio, have only spent a little time on their job or have no way of proving their income," Rebori said.

It's those who fall into the third category who often think they have no way of purchasing their dream home, Rebori said.

"If they fall into that category, there's a decent chance they can buy a home," he said. "A lot of people are finding out they can buy a house when they didn't think it possible."

Lenders interviewed noted that their default rates are low, however, that cannot be said industry-wide. In some cases, the problem is questionable lending practices, particularly in relation to home equity.

Vance said he has heard of mortgage companies advising people to mortgage their homes for more than what the home is worth.

"We don't offer what is called a 125 percent loan to value," he said. "For example, say a home is worth $100,000 and a mortgage company offers you $125,000 of equity on it. If you can't sell your home, you're stuck because your credit is ruined. I call this a questionable lending practice, which can be detrimental to the borrower and the lender."

Ridenhour said he has heard about scam artists in the industry: those that make home equity loans knowing the person applying for the loan may not be able to pay it back.

"When I hear about his happening, I give everyone the same advice," he said. "That is to stay with someone reputable who is held in high regard in the community, and someone who statistically maintains a high market share. I tell people to get a good-faith estimate from their lender. They should find someone who doesn't just help with the closing, but will stay with them for the duration of the loan."

Ridenhour also recommends that people not be driven by an interest rate. "They're cyclical, meaning they're always changing," he said.

Rebori tells borrowers, "Make your monthly mortgage payments a priority, and get it sent off right away."

Also, he said, "make it so your monthly payments are something you're comfortable with. Don't base your payments on the maximum amount of what you can afford."

He says his loan officers listen to the customer in order to see what their financial situation is.

"We work on putting them in a program they can afford," he said. "Some companies put people in a program that best serves the company and not the customer."