George Pedro, East Providence branch manager for Mortgage Master, has a front-row seat to the home lending industry. He recently took some time to discuss the home mortgage market and recent data about foreclosures in the Ocean State.
PBN: News came on May 12 from RealtyTrac that foreclosures in Rhode Island rose 34 percent in April compared with the month prior. But they were down 16 percent from April 2010. So do the latest numbers imply good news or bad news for the local housing market?
PEDRO: It’s hard to say that anytime foreclosures rise it’s a good thing. However, there were a glut of foreclosures that had been delayed due to some states and the government’s concern that foreclosures had not been done correctly. So, it wasn’t surprising that April saw that sizeable increase.
That being said, the fact that it’s lower than last year is good news, and I believe that, going forward, we will see a continuance of lesser foreclosures than we have in previous years.
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PBN: Are we still feeling the effects of moratoriums that some banks placed on foreclosures in wake of concerns about mortgage paperwork?
PEDRO: The reason for the moratoriums was that there was a fear that the mortgage foreclosure paperwork had not been done correctly. Therefore, the banks put the moratoriums in place to temporarily halt foreclosures, so the paperwork could be reviewed to ensure all the i’s were dotted and the t’s were crossed.
Once the banks felt satisfied that the foreclosure paperwork was in compliance, they then released the foreclosed homes into the market, which lead to the jump in April (in comparison with March 2011’s numbers).
PBN: Bank executives I speak with often say they are able and willing to lend despite a perception of tight credit. But real estate agents complain their clients must jump through hoops for mortgages. What do you see happening?
PEDRO: That’s a good question. Banks are willing to lend, but yes, in some cases, the lenders are forcing us to jump through hoops. Good credit is now more important than ever.
Anything out of the ordinary – such as not having the prospect of a two-year continuance of employment or anything negative on their credit history – will be questioned. In addition, banks frown upon large deposits to your account that don’t appear to be consistent with your monthly income.
Appraisals are also huge. Appraisers look at the value of the property, as well as the condition of the property.
PBN: Last year, we saw an uptick in sales that many attributed to the federal first-time homebuyer’s tax credit. Looking back, do you think the credit simply “moved up” the purchase of homes buyers would have purchased eventually anyway?
PEDRO: Yes, we definitely saw a slow down in purchase volume after the tax-credit expired. However, I think this year people are buying regardless of the tax credit, due to fantastic rates and tremendous bargains.
PBN: What about existing homeowners looking for refinancing? What sort of a landscape do they face?
PEDRO: It’s brutal, as the majority of the homes being sold today are foreclosures and short sales. Because these homes are selling at discounted prices, the average homeowner does not have many regular sales on which to gauge the true value of their home.
Before you spend money trying to obtain an appraisal to refinance your home, you should ask your lender or realtor to do a little bit of research to determine what homes similar to yours are selling for in this market. Unfortunately, in many cases, homes are worth far more than what an appraiser might say, but these days, the market just doesn’t support that value.
We anticipate that things will get better, as markets are always cyclical. People seeking to refinance just need to wait until the market takes an uptick, then more advantageous opportunities should arise.
