RISMEDIA, April 30, 2010—While there are varying opinions about the current state of the economy, one thing is for certain—continued growth depends heavily on loan availability for every qualified buyer. The National Association of Realtors (NAR) is pushing heavily to ensure the flow of capital continues into the housing and mortgage markets. In this month’s Power Broker Roundtable, industry leaders James Weichert, Jr. and Gino Blefari discuss where we stand on the issue of restructuring the financial markets.
Moderator:
Steve Brown, Special Liaison for Large Firm Relations, NAR
Participants:
James Weichert, Jr., Vice President, Weichert REALTORS®
Gino Blefari, Founder, President, CEO, Intero Real Estate Services
Steve Brown: As this issue goes to press, the federal government is once again pledging continued support of Fannie Mae and Freddie Mac—a vital component in the push to ensure adequate liquidity in the mortgage marketplace. And while there are varying opinions about the current state of the economy overall, there is widespread agreement that government efforts such as the Home Buyer’s Tax Credit are contributing to stabilization in our industry. But continued growth, especially in the upper end of the housing market, depends heavily on loan availability for every qualified buyer. That is why NAR, through its Presidential Advisory Group, continues the push to restructure Fannie Mae and Freddie Mac in a way that ensures the continued flow of capital into the housing and mortgage markets to qualified buyers in all economic conditions. Visit www.REALTOR.org/government_affairs/gapublic/gse_principles to learn more.
Where do we stand on these issues today and what do brokers need to know going forward? Today we have invited a couple of outspoken industry veterans to bring us up to date. Jim, your dad was among the earliest proponents of recovery stimulus efforts. What’s your take on restructuring and its impact on lending now?
James Weichert, Jr: The way we see it, we’ve gone from an environment of overly lax lending practices a few years ago to a period where regulatory reforms have become so restrictive that qualified consumers, as you have said, are having trouble getting loans. At the same time, these regulatory changes have increased the lender’s cost of doing business, and the additional expense winds up being transferred to the consumer in the form of more expensive loans. I think we need to find a happy medium that provides checks and balances without inhibiting lending.
Gino Blefari: In my opinion, in some ways, it is as though we’ve fallen down the rabbit hole back into the 1980s, when the first and most important question we asked was, ‘can this buyer get a loan?’ That is something we weren’t so concerned about for a while, and it’s come back front and center. One of the things we might think about now is requiring that buyers have adequate reserves to protect against default—because experience is showing us that even loan modifications don’t necessarily work. Too many people will just find themselves underwater again.
James Weichert, Jr: Which is one reason we have been flooded with short sales.
Gino Blefari: Actually, I got to calling them ‘long sales’ – do I need to explain why? So okay, we all learned that the package needs to be perfect when it goes to the lender, and brokers need to educate agents about how to move those packages through.
James Weichert, Jr: I think the worst might be over on that. In many cases, the wait time seems to be shortening as both REALTORS® and lenders work their way out of what has really been a pretty tight box. I think the lending situation will improve, though it certainly will take time.
Steve Brown: Yes, and NAR provides plenty of material to help brokers train agents in handling the short sale, including the new Short Sales and Foreclosure Resource certification. But the question is, is this surfeit of short sales – even better-managed short sales – helping to firm up what most of us would call a shaky recovery?
Gino Blefari: Not really, because in a short sale, the seller is the bank, and the bank doesn’t move up to a larger home. It’s the move-up market that needs to be addressed. One of the things we’d like to see happen, assuming a borrower has good credit and solid employment, is increasing conforming loan limits.
James Weichert, Jr: Absolutely. Some of the steps the government has taken, like buying mortgage-backed securities and keeping short-term interest rates low, are really helping to ensure adequate liquidity. A viable solution for jumbo loans now would help jump-start the higher end market. There seem to be a number of solutions being discussed…let’s see what transpires.
Steve Brown: You know, I have to say how important I think it is that brokers stay informed about all the options under discussion.
Gino Blefari: Yes, as well as on all the other issues that could impact the move-up market.
James Weichert, Jr: I agree. Also, if we’re going to bring about a sustained market recovery, it’s vital to work collectively as an industry. It’s why NAR is so important to us, and why the real estate, home building and mortgage industry associations need to work together for the common goal.
Gino Blefari: There’s no question that what happens to Fannie and Freddie impacts everyone – FHA and everyone else. Let’s face it, without available financing, none of us get to do real estate! But we’ve been through these kinds of cycles before. Hopefully, getting through this one will leave us all a little wiser, too.
