CHICAGO — With home mortgage interest rates again in the single digit--nationally averaging 9.86%, down from 12.5% just a year earlier--the country's mortgage bankers were in a jubilant, although guarded mood here last week as their annual convention wound down on a record year.
Although virtually unknown by the average home buyer, the 6,000 registrants attending the just-concluded 73rd annual meeting of the Mortgage Bankers Assn. of America represent an industry that, in the current year, originated more than one in three of the $400 billion in new-home mortgages that were written--in itself a 61% increase over last year's record pace.
And, while generally optimistic that interest rates--in the words of outgoing MBA President Ronald F. Poe, "are in a dish-shaped pattern which, on the low side, might dip another one-quarter to one-half a percentage point within the next six months before going up slightly"--the industry's leaders are also clearly worried about disturbing political trends that could impact, in particular, first-time, and low-income home buyers.
Incoming MBA President Thomas M. French, Jr., director of mortgage banking for the Bank of Boston's mortgage banking group in Jacksonville, Fla., pointed to recent studies suggesting that between 60% and 70% of Americans still do not own their own homes and to an even more dire prediction that 50% of the people under the age of 30 today will never be able to buy a home.
"For the first time in recorded history," French said, "home ownership is on the decline."
And, he added, "there are at least nine major cities in the country where the median-priced home is above $100,000. For Boston it is $156,000; Orange County, $149,000, and New York, $160,000. House prices vary widely by market, but for too much of the country, owning a home is moving beyond the reach of the middle class."
And lower on the economic scale, the MBA's new president said, the squeeze is even tighter because of Reagan Administration policies--in the words of Beryl Sprinkle, chief of the President's economic advisers--"to get the federal government completely out of the housing finance."
Neither this nor a simultaneous hint from the White House that it was considering the sale of the Federal Housing Administration to the private sector were, at first, taken seriously by the mortgage banking fraternity, French added.
"We believe that the Administration would lick its wounds and retreat. The wounds, if any, were superficial and the Office of Management and Budget and Dr. Sprinkle are still determined to weaken the government's link with housing programs," French said.
While President Reagan's zeal for "privatizing" government housing programs is, for the moment, on "hold," French continued at a post-inauguration press conference, "this struggle between the housing finance industry and the OMB over the federal housing programs has--in the past 12 months--heated up considerably and we are genuinely alarmed."
Among the Reagan Administration's tactics cited by the MBA leadership:
1--Cutbacks in funding for the FHA that has stripped the agency of two-thirds of its senior staff members at a time of unprecedented pressures for all FHA financing and refinancing.
2--A lack of support for the FHA that has let the agency's funding authorization run out seven times this year--a loss of 51 working days. Even now, French said, FHA has only a one-year lease on life.
3--The imposition of new user's fees for FHA applicants that have jumped them from 1% of the commitment to 3.8% and, French added, "that's not based on any actual cost studies, but imposed strictly to discourage use of FHA financing and force buyers into the private sector."
4--New policies with the Veterans Administration that leave lenders with defaulted VA mortgages "hanging out to dry," and with no option except to absorb those losses.
From a VA-default experience that previously averaged about 250 a year, the figure now stands at 15,000 foreclosures concentrated primarily in three oil-depressed states, Alaska, Texas and Oklahoma. Each foreclosure represents an out-of-pocket loss of about $20,000 each for lenders, many of them small thrift institutions, according to MBA research.
Speedier Escrow Closings
"And how could any private sector underwriter absorb a Texas, an Alaska or an Oklahoma?" French asked rhetorically.
Meanwhile, looking back on a year that had as many stresses as it had successes, the MBA's outgoing president Poe unveiled the organization's latest study of residential financing activity that indicated that the average time lag in closing an escrow has dropped from 75.2 days last year, to about 60 at present, "but which we still consider too long." He emphasized the need for more and better experienced appraisers.
Despite the continuing trend toward refinancing--accounting for 1.8 million such transactions in the last year and representing a record year, although now beginning to taper off--"more than 6 million mortgages are still outstanding, carrying interest rates of 12% or more," Poe added.