Franklin Financial Group Blog

Well the holidays have come and gone for another year, and we are now a bit into 2008.  As is typical from Thanksgiving through the New Year, things were slow. The current mortgage and real estate industry status didn't help things much either. Once the New Year began, I think people began to look past all of the holiday activities that can take their toll on our lives. The New Year seems to spark some thoughts and activity every year as people begin to plan for the time ahead. Investment property activity is picking up as folks look to possibly purchase some homes that are great deals as far as value is concerned. With some slump in the economy, and less people being able to purchase homes, investors can find this to be a good time for their business as they can rent to those who can't purchase their own homes.

While we are in the middle of winter, spring is not so far away. I am seeing some people taking out home equity loans or lines of credit to do the work on the inside of their homes (such a finishing basements) and preparing for work to be done on the outside of their homes (such as roofs, decks, patios, landscaping, etc.)

Also with the New Year comes a new fiscal tax year. Some customers are looking to make their moves into new homes now that they have the time and energy to focus on this next step in their lives. With property values being advantageous for buyers, it makes sense for many to enter the purchase market. Rates are still very attractive for those looking to purchase a new property.

With the rough year of 2007 now behind us, and a full year of promise and excitement in front of us, let's hope mortgage and real estate activity pick up and stay up!

Today I received notice that Bank of America has agreed to purchase Countrywide Financial Corporation. This merger is historical as it will create the largest U.S. mortgage lender and servicer.  I have also heard rumblings that Washington Mutual is possibly going to be purchased by JPMorgan Chase.  In 2007 Citifinancial purchased InterFirst Wholesale Mortgage Lending, a division of ABN AMRO Mortgage Group, and Argent Mortgage.  These three massive corporations show how mortgage operations have been impacted nationwide. In addition to other mergers that have taken place, there have been many lenders who have gone out of business entirely. Since late in 2006, 214 major U.S. lending operations have imploded.  That is a staggering figure to consider!

Looking at the figures mentioned above, the number of lenders who are willing and/or able to lend in the residential market has dropped considerably. I deal mostly with the wholesale divisions of the lenders I am approved to broker loans through. Many of these divisions have either pulled out of the market, or have revised their product offerings to a much more conservative approach than either they were offering previously, or still do through their own retail channels.  It is hard to predict the future but what I foresee is certainly more loans originated through fewer, larger lenders to start. This may be good or bad. It may be good because the larger lenders will have the financial backing or stability to continue to offer necessary mortgage programs and products to the public.  It may be bad because fewer lenders means less competition, which can also reduce the programs and products offered to the public.

While much media focus is placed on what is happening with the larger lending institutions, you do not hear much about the "small guys" still lending on mortgage related transactions. Lately I have researched some smaller banks operating maybe only one or two branches, which have been willing to lend on some properties that the larger lenders would not touch. These smaller banks portfolio the loans and service the loans themselves. This enables them to keep additional profits in-house. Of course profits are attractive, but the deals have to make sense and not be too risky in order for the smaller banks to lend their money on these deals.

It is going to be interesting to see how things turn out. The mortgage industry was destined to suffer at some point, which it obviously has and still is. As always I remain positive due to the fact that our population is constantly growing, which means so is the number of people who will be looking to obtain financing on real estate.