by Michele Newbern Gillis
Staff Writer
It seems all lenders are in agreement - no matter what happens to interest rates, people will still buy homes.
A panel of lending experts including Wyndham Manning of BB&T, Carolyn McMoran of Countrywide Home Loans, Milt Nuckols of Wachovia Mortgage and Curtis Ford of Wells Fargo Home Mortgage gave their opinions of interest rates, mortgage fraud and one-stop shops during last month’s Northeast Florida Builders Association’s Sales and Marketing Council’s breakfast meeting.
Brad King of BB&T Mortgage was the moderator.
When asked about rising interest rates, Milt Nuckols of Wachovia responded with “What rising interest rates?”
“I think everyone expected a rising interest rate environment this year, but it never really materialized,” he said. “Sooner or later, I think most experts expect rates to rise, but the economy is going well and earnings are going up.”
He said that looking back on the 1980’s with interest rates at 20 percent, people still bought houses. He said if you look at it in relative terms, the five or six percents of today look pretty good.
Curtis Ford of Wells Fargo brought up the point that the people who would be most affected by rising interest rates are people on the low end of the market.
“What will be affected is affordable housing,” said Ford. “It will affect) the homebuyers who are already on the cusp and stretched to the maximum on affording the now higher prices we are seeing on entry level housing.”
He said the middle and higher level buyers won’t see much of an effect until interest rates reach seven percent, if that ever occurs.
McMoran agreed that interest rates will change, but not that dramatically as in the past.
“We have a lot of new agents, buyers and loan officers who have never seen a rising market and guess what, people still buy houses,” said McMoran. “They still need homes. We just need to get creative.”
King asked the panel about investment buyers and how they will be affected in the future.
“One of the things that we want to ensure is that not only do we want to help the investor, we want to protect the builder and the community,” said McMoran. “The last thing that you want is an over abundance of investors in any one given area because if things do go South, then investment properties are the ones that go first. So, you’ll find that lenders are going to limit the number of investors in contiguous areas just to protect those communities.”
Ford brought up the issue of investor flipping and how it affects builders.
“I’m starting to see builders who are putting conditions in the contract to help limit investor flipping,” said Ford.
King brought up the issue of mortgage fraud, but the panel agreed that they have a good handle on it and that identity theft is a more prevalent problem today.
Manning said that mortgage fraud is usually caught up front by the loan officers and the processor handling the loan application. Also, he said they oversee the loan applications to verify information is correct before it would ever make it to approval. Also, they police their loan officers and processors to make sure they are doing everything on the up and up as well.
“We would rather try to make a loan work on the books, than have someone cross that line,” he said.
Another thing his company is doing is comparing the tax returns submitted with the ones actually sent to the Internal Revenue Service on suspicious-looking loans up front.
“You would not believe the number of people who don’t give us the same tax returns that they sent to the IRS,” said Manning.
McMoran said her company strives to instill values in the loan officers during training that no matter what, no one is worth their integrity to make a loan work.
“We are willing to make a deal work if we can, but not by breaking the rules,” said McMoran. “The preventative is sitting right here in this room. Each and every one of you need to look inside yourself and say ‘Is my integrity worth this?’ Because that is where it starts, right here with us.”
There are many ways buyers can get financing on their new home, but lately a lot of one-stop shops have been emerging where builders and mortgage lenders team up to share a piece of the pie. King asked the panel to explain the pros and cons of this type of arrangement.
“Obviously, to a builder, the pro is the opportunity to have a piece of their earnings from the mortgage, which of course they are driving, so it makes sense that they are looking for an opportunity to do that,” said Nuckols.
Nuckols added that that situation is a more controlled situation and hopefully should go smooth because everyone knows everyone and you aren’t dealing with a new lender every time you go to sell a house.
A con he mentioned is the lack of choice for the consumer.
“Asthe market gets more competitive, margins get thinner and ultimately for the builder and who they are doing the loan with to have a piece of the pie. Logically, it will push the prices up,” said Nuckols.
Manning pointed out that other states -Texas, for one - have passed laws saying that builders can not give incentives to buyers to use their chosen lender because they were finding that the buyers were ending up with higher interest rates with the preferred lender than if they had shopped around.
Basically, all of the lenders agreed that even though one-stop shopping is attractive, no matter what company the builders team up with or incentives they offer to use a certain lender, buyers are going to do what they want in the end.
A question that was posed to the panel was “Do they ever see online closings rather than in-person/paper closings?”
McMoran said that what closings will always need even with technology is people intervention.
“We need to know that the person who is signing is who they say they are,” said McMoran.
She said new technology allows them to take the application online and send the closing package electronically, but that there still needs to be some people intervention otherwise they don’t know who is on the other end of the computer.