New Home Purchases Join Strong Refi Trend

The past 18 months hosted wild swings in the mortgage market as credit standards careened from one extreme to the other. The flight arced dramatically between too loose and too easy during the first half of 2008 and too tight and too difficult in the second half of the year.

Janie Boyce, Little Rock senior vice president with Bank of America, said the market gyrations have calmed during the first half of 2009 as lenders sort out the new rules of engagement.

“I don’t think it’s where it should be yet, but it has gotten better,” said Boyce, who oversees BOA mortgage lending in Arkansas. “The pendulum is getting closer to the middle.”

An increase in home buying this spring is adding to a mortgage stream that was dominated by refinancing activity.

“Obviously, rates are at historic lows, which is creating a refi boom,” Boyce said.

“With rates as low as they are, people can afford more home, and we’re beginning to see more purchase business. The rates have really caused an increase in first-time homebuyers,” he said.

Home-buying loans accounted for 48 percent of BOA’s mortgage lending in Arkansas in March. That number grew to 59 percent in April.

The stepped-up residential sales activity is a welcome sign that 2009 will mark a return to something approaching normal.

“The market is really turning around,” Boyce said. “The horizon looks great; it really does.

“We have figured out how to thrive with the changes and become credit coaches to work with borrowers who need to clean up their credit and get a loan farther down the road.

“People were getting approved for loans that were too easy. It was the industry as a whole.”

Helping BOA of Charlotte, N.C., with market gains nationwide is its takeover of Countrywide Financial Corp. of Calabasas, Calif.

The combined operations transformed BOA into the nation’s largest mortgage lender and loan servicer.

In Arkansas, the merger increased BOA’s lending offices from six (Little Rock, North Little Rock, Hot Springs, Conway, Fayetteville and Bentonville) to eight with Countrywide offices in west Little Rock and Fayetteville.

NWA Recovering
The positive signs in mortgage lending are visible in the state’s most volatile real estate market as well. The overbuilt residential market in Northwest Arkansas is recovering, reports Ross Mallioux of Harrison’s First Federal Bank.

“People realize that the world hasn’t come to an end in Northwest Arkansas,” said Mallioux, president of First Federal’s western division. “We have seen improvement during the last 45 days.

“We see houses selling better and people realizing that value is there. Rates are at historic lows, and it’s a great time to buy a house.”

The positive trends have endured the stifling affect of a devastating ice storm during the first quarter and record rainfall during the second quarter.

“Natural disasters are not conducive to house hunting, and the same goes for the rain, but the houses are absorbing,” he said. “I don’t know what it will take to loosen up construction loans for new houses. It will depend on how the trends go.”

The inventory reduction is creating some opportunity for new home construction that could lead to housing starts later this year.

A return of dry weather in the coming weeks could see a positive hiccup of home sales from pent-up demand, too.

Rick Anderson, senior vice president and manager of mortgage lending at Metropolitan National Bank, said 2009 has started “really, really” strong.

Anderson said that’s welcome news after wading through a slow second half of 2008, which was overwhelmed by a very slow fourth quarter.

“The $8,000 first-time homeowner tax credit is having a positive effect,” he said.

That government program extends to homebuyers who haven’t owned a residence during the last three years, with an annual income ceiling of $75,000 for individuals or $150,000 for married couples.

Between stimulus incentives and ultra-favorable interest rates, purchase activity has picked up in Metropolitan’s markets.

A 50/50 breakout of purchase mortgages/refinance business in March has changed.

The ratio went to 60/40 in April, and Anderson expects May will likely see a further shift to 70/30.

“Our market has been strong relative to others,” he said. “We’re excited about what we’re seeing.”