BOSTON — The new president of the Mortgage Bankers Assn. of America bravely promised here that during his year in office he will cut the usually frustrating home loan approval process time to 15 days.
John M. Teutsch Jr., who is president and chairman of the executive committee of CompuFund/Network Funding Corp. of Seattle, addressing the 74th annual convention of the MBA, declared:
"There is no reason that it should take 45 to 60 days to close a loan if the industry can find ways to shorten that time period. It is certainly in the mortgage bankers' interest to shorten our interest rate risk, but there are clearly benefits for the consumer who wants to settle quickly on a new home."
It can be done, he said, by using uniform forms for appraisals, standardizing the methods used by insurers and investors, simplifying and standardizing insurer and investor requirements, using the same calculation process for income-to-housing-expense ratios and through automation to provide for a more rapid transfer of data.
At a press conference, he said this goal can be accomplished by the end of 1988, when his term ends.
The speeded-up process would also tend to protect interest rate commitments for home buyers, he added, pointing out that mortgage bankers are involved in one out of every three home mortgages.
Delays and backlogs in the home loan lending process have often caused buyers to lose out on more favorable interest rates during periods when rates fluctuate upward.
Lyle E. Gramley, chief economist for the MBA, as other industry executives had done earlier during the four-day convention, predicted that interest rates on conventional 30-year mortgages will hit the 12.5% mark by mid-1988.
Rates to Increase
Now at the 11% mark, the rates will increase during the coming months, he said, and new- and existing-home sales will probably dip by 10% because of that.
He said the Federal Reserve Board's action to raise the discount rate--the rate it charges on loans to financial institutions--to 6% on Oct. 7 was a wise move to "get ahead" of inflationary pressures. Gramley said with the nation's economy in its sixth year of expansion and with improvements in the quantity of exports, the rate increase was necessary.
With inflation now at the 5% mark, there will have to be a reduction or slowing of the economic throttle to a 2 1/2% rate to avoid further action by the Fed in increasing its discount rate, he said.
The stalemate between the White House and the Congress on action to reduce the federal deficit will continue to trouble the economy, he said. As long as that situation exists, there can be no long-range solution, and that will cause the Fed "to get ahead or stay ahead of the inflationary curve" by continuing to raise its discount rate, which, in turn, will impact on prime lending rates and home mortgage interest rates.
Expand to Pacific Rim
The organization's outgoing president, Thomas M. French Jr. of Jacksonville, Fla., citing the globalization of all money matters, suggested that the MBA consider expanding its membership to Pacific Rim nations, particularly Australia and New Zealand.
"If the Rotary, Kiwanis and Lions Club can do it, so can we," he suggested.
The convention fully supported the proposed housing bill now in Senate and House conference. The legislation would continue government supported programs but faces a possible presidential veto unless there is considerable compromise, as indicated by Carl D. Covitz, undersecretary of Housing and Urban Development. Covitz said the federal deficit must be reduced and that the housing bill will have to adapt to that consequence.
Congress "doesn't have the guts" to balance the budget, he charged, and therefore cuts must be made in all areas of the budget.
But he promised to discuss all facets of the bill with MBA lobbyists, with Teutsch and Warren Lasko, the MBA's executive vice president.