By Emmet Pierce
Held at the San Diego Convention Center, the event drew an estimated 2,800 mortgage industry professionals. At the opening general session on Oct. 12, the mood of speakers who addressed attendees was upbeat, in keeping with recent news headlines about stabilizing home sales and an improving stock market.
Association President John Courson told attendees the industry had done a good job of helping troubled borrowers and restoring public confidence in the wake of the mortgage market meltdown that began in mid-2007. He drew laughter from the crowd when he compared critics of the mortgage industry to bumbling cartoon character Elmer Fudd.
“I have found a lot of Elmer Fudds firing shotgun blasts our way,” he said with a smile.
David G. Kittle, outgoing chairman of the mortgage trade association, asserted that lenders had played a major part in preventing even more home loan foreclosures. The congratulatory tone shifted sharply in the afternoon general session, however, when Michael D. Berman, the trade group’s chairman-elect, asked some of the industry’s major players to predict the future of mortgage lending.
Edward J. DeMarco, acting director of the Federal Housing Finance Agency, said the industry has yet to come to grips with the surge in mortgage delinquencies that began two years ago. Charles E. Haldeman Jr., chief executive officer of mortgage giant Freddie Mac, said damage done to the industry during the current recession won’t be quickly repaired.
Haldeman said he foresaw “a permanent dislocation” in U.S. consumption patterns. It would be a mistake to relax and assume all is well because of recent “glimmers of hope” in the economy, he added.
“It’s an awesome task that’s ahead of us,” he said. “I believe it would be a real mistake to be too confident… Assume that this is a massive problem that is going to take huge effort.”
Michael J. Williams, president and CEO of government-sponsored enterprise Fannie Mae, agreed. Efforts to keep people in their homes by modifying troubled loans are not reaching everyone who needs help, he stressed. David H. Stevens, who heads the Federal Housing Administration, said he expects U.S. home values to fall by 10 percent by the first quarter of 2010.
Many real estate analysts and economists have blamed weak loan underwriting practices for the flood of residential mortgage failures. When the housing boom was in full swing during the first half of the decade, prudent lending practices adopted during the Great Depression were widely abandoned. The joke in the industry was that anyone who had a pulse could qualify for a home loan, regardless of income.
“We’re still paying for the sins of the past,” said Stephen Ledbetter, who represented Ginnie Mae, a government-backed enterprise that guarantees loans. “We got what we paid for.”
During the housing boom, Fannie Mae and Freddie Mac helped keep the money flowing by purchasing home loans that were then sold on Wall Street as mortgage backed securities. The market for those securities dried up after loans began failing in large numbers. Banks have tightened credit in anticipation of more foreclosures.
“There are a lot more losses to come in 2010,” said Dave McDonald, who recently stepped down as president of the San Diego County chapter the California Association of Mortgage Brokers.
Many lenders have delayed foreclosures in hopes that the economy will improve and allow them to keep the bad debt off their books, he added. That has created “a shadow inventory” of vacant homes that have yet to hit the market in cities like San Diego, where sales and prices surged during the housing boom.
Ken Tablang, a real estate agent based in Bankers Hill, said prospective home buyers share the same sense of caution that was voiced at the mortgage bankers convention. Many are delaying purchases in hopes that home prices will continue to fall. Tablang advises clients to buy now, while prices are well below their housing-boom peak and interest rates remain at historical lows.
Ultimately, home values will rise, he said. “You can never time it,” he said of the housing market. “Buy something that you feel comfortable with. Think of it as a bank account.”
Bill Vivian, of Broker Bill’s Realty in North Park, said he expects problems in the local housing market to persist through 2010.
“A huge part of the whole mix is where unemployment is going,” Vivian said. “Until we get a handle on that, we are going to see these mortgage loan problems.”
Mary McTernan, a real estate agent based in North Park, said her business has been brisk, despite the concerns voiced by mortgage industry leaders. Many buyers believe the economy finally is turning around, she added.
Jay Brinkmann, chief economist of the mortgage bankers group, has his doubts. During the convention, he forecast that foreclosures will peak by the end of 2010, after the nation’s unemployment rate climbs above 10 percent. In San Diego County, the unemployment rate already has exceeded that mark.
The effects of the recession will continue to be felt through reduced business investment and home construction, Brinkmann said.
Not everyone who attended the convention came to discuss lending policies or the recession, however. Many were there to network with mortgage and real estate professionals.
In a large exhibition hall, companies that serve mortgage lenders set up booths to hawk their wares. Strolling through the aisles, attendees could hear pitches from firms that specialized in real-estate-owned (REO) sales, document tracking or avoiding mortgage fraud.
Patti Simab, who works for a Los Angeles document-signing company, said the mood in the exhibition hall was much more subdued than during the heady days of the housing boom, when profits were high and money flowed freely.
“I’ve been in this business for 13 years, Simab said. “Things have really changed. Most people don’t know when it will get better. It depends on when the banks start lending again.”
