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April 2008
Index of all
messages
from the Association President
President’s Message – Mortgage crisis: boom or bust?
By David DeElena
Colorado has struggled with economic issues since 2001.
While the rest of the nation enjoyed varying degrees of prosperity, we saw challenges including loss of employment, declining population and of course, real estate slowdowns. In the nation’s current climate, everyone – the President, Congress – is eager to provide solutions to a problem that was years in the making.
The Colorado Association of REAL-TORS® has been working behind the scenes for years to develop a licensing requirement for mortgage brokers. It has also provided input on the establishment sof ome governmental controls on the mortgage industry.
As you know, in 2006 it became mandatory in Colorado for mortgage brokers not only to be licensed, but also to be bonded and to carry errors and omissions insurance. Statistics provided by the Division of Real Estate show that the numbers of brokers obtaining licenses has dropped dramatically.
On the positive side, brokers with questionable business practices have gone by the wayside. But as the number of brokers has diminished, so too have the financing alternatives available to buyers. Unfortunately, even some with strong credit are unable to obtain financing. Programs seem to be disappearing daily.
Like the passenger pigeon, full service gas stations and pay phones, 100 percent mortgage programs seem to be headed for extinction.
Recently, Fannie Mae deemed the Denver metro area a declining market, a status which leads to additional challenges for buyers and sellers. As a result, most lenders require a minimum of a five percent down payment on any conventional loan; other factors like the appraisal could mean that an additional five percent is required. And, when the loan is in the closing department, the mortgage insurance company can require another five percent down. All these additions can add up for a buyer who went into the transaction believing that the original five percent down would be sufficient.
Now more than ever, REALTORS® must become more knowledgeable about the various mortgage programs and focused on protecting the buyer’s interests. Effective communication with the lender becomes even more important as the various investor programs change daily.
This climate of uncertainty creates one more obstacle in the recovery of the Denver real estate economy. Buyers are looking for some stability in their home purchase experience. Sellers are increasingly concerned about the ability of prospective buyers to complete the transaction. Until some equilibrium is restored in the conventional arena, we will see increased use of governmental loan alternatives.
The National Association of REAL-TORS® (NAR) has been working with our political leaders to provide alternatives to the current mortgage dilemma. Slated for consideration is an FHA reform package that would increase loan limits and reduce the down payment requirement to 1.5 percent.
NAR sent out a “Call to Action” March 21 asking all REALTORS® to help get the message out about the need for improving the quality and stability of the mortgage industry. If you have not responded, go to www.Realtor.org and follow the Call to Action links to let your voice be heard. Our clients will appreciate your efforts and your business will benefit from providing some much needed consistency to an integral part of the housing economy.
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