Even the most relentless optimist would have a difficult time portraying the state of the mortgage market as a glass-half-full scenario. Overwhelmingly negative – and indisputably official – statistics, for one thing, are hard to argue with. Massive job losses within the industry drive the message even harder.
Furthermore, as if the American Dialect Society's recent selection of the word ‘subprime’ as the official word of 2007 were not enough proof that thoughts of foreclosures, fraud and other failings have entrenched themselves in the general American consciousness, the National Foundation For Credit Counseling (NFCC) recently unveiled a few new statistics on the growing pessimism and concern among mortgage borrowers nationwide:
Sixty-one percent of homeowners who took the NFCC's online quiz do not believe their financial situations will be improved by refinancing their home, and well over half of the respondents actually reported having ‘trouble sleeping due to worry over their current financial situation, the possibility of losing their home or car, or the ability to use credit.’
The incidence of mortgage-induced insomnia has jumped 7% since last October, the organization added.
No one appears to have done any survey on the sleeping habits of loan originators or servicers these days, but one would not expect those results to be encouraging.
Thus, the inevitable question becomes whether there is any good news to report. And by good news, we seek not an isolated human-interest victory story, but actual industry indicators, legitimate opinions and data that might be interpreted as positive – no matter how slight. Here a few from recent days:
- Mortgage applications rose last week after weeks of decline, according to the latest data from the Mortgage Bankers Association (MBA). The market composite index, which the MBA uses to measure application volume, increased 32.2% on a seasonally adjusted basis.
The refinance index posted particularly large gains – jumping 53.9%, and the refinance share of mortgage activity increased to 57.7% of total applications, MBA says.
- Interest rates have fallen from last week across multiple mortgage products, reports Bankrate.com: The rate for a 30-year fixed-rate product has dropped 0.26%, while rates for 15-year fixed-rate loans and five-year adjustable-rate mortgages have decreased 0.31% and 0.33%, respectively, under Bankrate.com's test case on a $165,000 loan.
‘The reason mortgage rates have fallen so far isn't hard to find: Deepening fears over the economy,’ warns the Wall Street Journal. At the same time, though, some individual borrowers may have reason to welcome the news.
As Sterling Thomas, vice president of the Utah Housing Corp., told the Salt Lake Tribune, lower rates can spell greater ease of refinancing from potentially dangerous adjustable-rate loans to fixed-rate products. Moreover, he added, lower rates mean lower monthly payments.
- While talk of a nationwide recession swirls, at least a few with some authority on economic matters still see something other than doom and gloom on the horizon.
In fact, ‘2008 looks to be a year of rising growth,’ St. Louis Federal Reserve Bank president William Poole recently told a gathering of financial planners in St. Louis. Forbes reported that Poole predicts ‘slow expansion’ for the first half of this year, followed by a ‘quickening pace.’
At the Commercial Mortgage Securities Association Investors Conference earlier this week, Peter Muoio of Maximus Investors acknowledged the risks of recession, but also raised the important possibility of a far less disastrous ‘muddle-through’ scenario. During a panel focusing on the economic outlook and industry implications, he pointed to such signs as export growth and strong non-residential construction as positive factors that should not be ignored.
Of course, clinging to some stray sunny prophecies – or even guardedly optimistic forecasts – in an environment where darker predictions dominate might not be the smartest move in the long run. But even though glass-half-full might be unreasonable, no one says we need to see the glass as completely drained – quite yet.
–Jessica Lillian, Commercial Mortgage Insight
