Blown Mortgage

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Okay, Chris had his say on what he thinks for 2008, so it’s my turn.   Then we’ll see what happens (No pressure, Morgan!)

Reality Land is where we need to be.   The hard thing to figure out is, in the third inning of a double header, where’s the game going to end up.    Before I tell you my view of where the market is heading, let me tell you a couple of things first:
1. My business is up about 32% compared to last year.
2. My phone is still ringing.
3. My biggest closing month this year will be December.
and I’ve been preaching reality land to my referral sources and customers all year, so I don’t want to hear anything about having to be a Lawrence Yun wannabe to succeed in today’s market.   

Okay, here’s where I think we’re going to be in 2008:
1. One of the “BIG 2″ won’t exist at the end of the year.   Whether it’s bankruptcy or more likely a “forced marriage” I don’t know, but they won’t both be around.  It wouldn’t surprise me if neither one of them is around.   I think Bank of America is drooling over the possibility of getting their hands on all of those Countrywide customers……                                  
2. Interest rates will remain stable and drift lower throughout the year.   I’m talking mortgage rates not what the Fed controls.  I’m also talking conforming, fixed rate loans with a downpayment of at least 5% or more.                                           
3. Home sales (both new and existing) will be down substantially, more so in the areas that saw a larger percentage of their loans as subprime, Alt A, and jumbo loans.   The same for house prices.  Down substantially, but more so in places that saw dramatic increases.   From 2000 to 2005, my brother (in Sacramento) made more on appreciation than he did in salary.   He isn’t any more.  

4. Fannie Mae and Freddie Mac will own a much larger share of the market.  However, because of the problems they are having, the rates won’t drop as much as the economic fundementals would allow for.   Additional risk based pricing adjustments will be put in place to reflect the realities of the marketplace and those will offset some of the drop in rates.

5. There will be a number of “forced marriages” of struggling banks and mortgage companies in 2008.   Those who didn’t play in the subprime world will remain healthier than those who did.

6. I’m going to disagree with Chris on the actual percentage, but I think there will be a significantly smaller number of people selling real estate, building homes, writing mortgages, appraising homes and doing title insurance in 12 months than there are now.   Chris said 75% less, I’m thinking 50% is a more accurate number.

7. While I believe there will most likely always be a place for honest ethical professional mortgage brokers (like Chris and Morgan), I do believe that the job losses will be higher on that side of the “fence” than on the retail side (where I hang out).   Why?   Because the rules will tighten and because as the market gets more difficult 2 things will happen: 1) Customers will get more scared of working with “that mean evil mortgage broker” (sarcasm please!) and opt to work with “the bank” and 2) More lenders will see the built in customer base at a bank as a way to hang on and survive.

8. There will always be houses selling and prices will NOT fall so far that the average buyer can pay cash for them.  So there will be people needing mortgages.  The number of options for people with less than spectacular credit (read credit scores under 680) will be severely limited.   The low downpayment loans will only go to people with very good credit (above 700), conservative debt ratios, and some actual cash in the bank left over after closing.

9. Full Doc Only - enough said?

10. The need for not just competent, but excellent mortgage professionals will remain strong and potentially grow stronger as the year progresses.   People who know what’s going on, people who can help their clients and referral sources navigate their way through seismic shifts in the credit markets.   People who read www.blownmortgage.com!

The long and short of it, it’s going to be challenging year.   It’s going to be a year where not everyone survives in the industry, but frankly if we aren’t in a refi boom year, not everyone should survive.   The industry is primed for a weeding out.   It’s going to be a year where advice, counsel, and information are going to be crucial.

I’m excited about 2008.   I think it’s going to be an opportunity for the top professionals to shine and an opportunity to help those who do buy and sell do so wisely in a tumultous market.

So, what do you think?

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