Two years ago, the mortgage business nearly drowned in the torrent of the financial meltdown.
The end seemed near.
“We saw our (credit) conduits drying up,” said Barbara Pattee, president of Springs Mortgage Inc. “We had built up a niche of banks to do business with that went out of business.”
It was 2008, and it was a dismal time for mortgage brokers and bankers.
Today, existing and new-home sales remain far off their peak, but business is decidedly better than it has been in a while.
The mortgage industry, believe it or not, is rebounding.
Sure, far fewer brokers and bankers work in the business today than, say, 2007. But those who remain on their feet feel as if the worst days could be behind them.
Their biggest complaint centers on what they view as an over-reaction by federal regulators, saying oversight has swung too far against them.
“It’s a stressful business to be in right now,” said Troy Brennan, a mortgage banker with First National Bank. “It’s a lot tougher to do these days because of the regulations. They went from being too loose to too tight.”
Some of the new rules came even before the meltdown. Mortgage brokers, as of Jan. 1, 2008, were required to register with the Nationwide Mortgage Licensing System and Registry, pass a criminal background check, and be licensed with the Colorado Division of Real Estate.
“They’ve tracked us down, licensed us and have run background checks,” Pattee said. “They put a fork in us — we’re done.”
Well, not quite done.
Interest rates have fallen again in recent months and Uncle Sam has handed out millions of first-time homebuyer tax credits. Those two factors have helped enormously, people in the industry say.
“Two years ago it was bad, the toughest time in our industry,” Pattee said. “Have we been beaten and kicked down? Yes. But we’re not dead.”
Not even close. Last year, the volume of loans at Springs Mortgage increased 120 percent over 2008, returning to 2006 volumes and erasing the declines of 2007 and 2008.
“We’re too entrepreneurial to die. And it’s all about service,” Pattee said. “When people call us — we answer the phone and take care of them.”
Of course, so do competitors.
All in the industry have been helped by the actions of the Federal Open Market Committee, which in late 2008 cut the federal funds target rate — the overnight rate at which financial institutions lend to other institutions — to an unprecedented range of zero to 0.25 percent.
Then, in February of 2009, the American Recovery and Reinvestment Act increased the newly established first-time homebuyer tax credit to $8,000, which did not have to be repaid if the home was purchased in 2009 and served as the taxpayer’s primary residence for three years.
That was the impetus needed for resurgence.
“Everyone was curled up and wondering what was going to happen next,” Brennan said. “But then the rates started dropping at the beginning of 2009 and people got excited.”
First-time buyers nowadays comprise much of the mortgage business. Just how much might surprise most.
“First-time homebuyers are about 60 to 70 percent of our business, which is huge,” Brennan said. “People want to buy because rates are low.”
Sales have increased locally. Year over year, local housing sales rose 138 units in December, 51 in January and 68 in February, according to Pikes Peak Realtor Services Corp.
And anyone who has sat on the sidelines until now has until April 30 to accept a contract on a house to claim the tax credit.
“Many of us are crossing our fingers and hoping they (lawmakers) see fit to extend the tax credit again,” said Jay Garten, Colorado Springs branch manager of MetLife Home Loans.
Many first-time buyers purchase homes in the $200,000 to $250,000 range, which “frees up the move-up buyers,” causing an uptick in new home sales and new builds in El Paso County.
While the average home price in Colorado Springs dropped from $272,232 in August of 2006 to $222,531 in August of 2009, the region fared better than many others in the nation, and signs indicate the trend will continue.
“The (local) market is steady and healthy — we don’t foresee any wild turbulence in the near future,” Garten said.
Meanwhile, mortgage brokers and bankers are adapting to new regulations — finding their place in a new era of lending.
“The triangle of buyer, lender and real estate broker has always been in place,” said Wayne Jennings, a real estate broker, with Remax Properties Downtown. “Because of new regulations, we have to know, trust and put more faith in each other than in the past.”
Even those in the industry acknowledge that some of the regulations are helpful.
“Business was coming too easily for (the mortgage industry) — they didn’t have to audition for the role, so to speak. The regulators hadn’t really held their feet to the fire,” Jennings said. “They were too footloose and fancy free, before.”
Brennan sees a silver lining, too.
“Personally, I’ve become more successful, because it’s not as competitive with less people in the business,” he said. “Some good people dropped out when their pipelines dried up; they had to move on and do something else — but, basically, the shakeout was companies and people who shouldn’t have been in the business.”