Today's market conditions are similar to what mortgage brokers experienced 15 years ago, says Mike Jacinto, president of Jacinto Mortgage Group Inc., Fremont, California. Jacinto is an 18-year industry veteran whose firm operates six offices in the San Francisco Bay area. Events of the past year "have been a transition" for his firm, he says.
But he adds that brokers with less than a decade of experience would find our current situation "quite a change" from what they were used to. Falling loan volume has caused a purging of industry participants ranging from title companies to mortgage brokers, Jacinto concedes.
Right now falling property values are "the biggest hurdle" his loan officers are facing, says Jacinto. Homeowners trying to move from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage (FRM) can find that's not possible if their equity has dropped.
Yet, overall, the market is functioning fairly normally. Jacinto adds that "product is still out there," even though several large lenders have closed their wholesale divisions. In fact, he notes that a wider range of loans are available now than was the case in the early 1990s. Some practices have ended, such as helping first-time homebuyers by combining an 80 percent conforming first mortgage with a smaller second lien in order to avoid private mortgage insurance (PMI) premiums. But now PMI premiums are tax-deductible for many buyers, so there is less resistance to its use, he reports.
Jacinto Mortgage concentrates its marketing efforts on previous clients. Each month the firm mails a mortgage newsletter to 6,500 customers, and has been doing so for years. "It's the best investment we ever made," says Jacinto. Referrals flow back because Jacinto Mortgage focuses on providing long-term borrower solutions. Jacinto typically urges homebuyers to use a 30-year, fixed-rate loan if they can afford the payments. He tells them they'll need to refinance only if rates fall drastically in the future.
Encouraging borrowers to opt for a 30-year loan isn't hard now, since there's little difference between fixed payments for five and 30 years, Jacinto says. He adds that consumers are becoming more cautious in their household budgeting due to growing financial pressures. Many homeowners also are eager to get out of their adjustable-rate loans into the security of a fixed-rate mortgage.
California purchase business now involves working in foreclosure situations, says Jacinto...