Stephen C. Tetzner is founding partner and current vice president of Homestar Mortgage. He has originated more than $1 billion in mortgages in his near-two decade career, earning him the distinction of being named the No. 1 originator of mortgages in Rhode Island by National Mortgage News and Origination News. He is also the president of the Rhode Island Mortgage Bankers Association.
PBN: Rates for 30-year fixed mortgages fell to 4.12 percent last week, the lowest since Freddie Mac started tracking rates in 1971, and the lowest since 1951. Have you seen an increase in mortgage and/or refinancing applications as a result of the low rates?
TETZNER: Absolutely, the refinancing has picked up in the last month with the rate drop. However, we have been in such a low rate environment for so long, it’s not as busy as one would think. Just last November rates were at almost the same level, so many people already have a great rate.
PBN: Have the low rates in the last few years changed the mix of mortgages in terms of fixed versus variable rates?
TETZNER: Yes, in a low rate environment more people will choose a secure fixed-rate loan. However, ARMs are still popular with the higher end buyers and borrowers that are confident in how long they will own the home. For example, if a buyer knows they will own the property for a maximum of 5 years they may choose a 7/1 ARM. If they can get a 3.25 percent rate versus a 4 percent rate, it is worth the savings.
PBN: Do you think that this level of interest rates will have an effect eventually on the housing market, as in, will we see more homes bought and sold in the coming months?
TETZNER: I don’t think rates have as much of an effect on the purchase market. Right now buyers are more concerned with their employment (will they be able to afford the payment?), and will the value of the home decrease? Fluctuation in rates tend to drive buyers to make a decision. So, when the threat of rates rising becomes imminent, certain buyers will move quicker to lock a lower rate.
PBN: Have the tougher lending standards that banks are employing neutralizing the demand that the low interest rates might generate, and thus keeping the housing market from recovering more?
TETZNER: I really don’t believe that the current lending standards are the cause for a slower real estate market. There are still many programs available at safe affordable fixed rates with little or even no money down programs for people to purchase a home. If a buyer has employment, can demonstrate their ability to afford the mortgage payment and has fair to average credit, they can buy.
I feel the media is making people think that there is no way to qualify for a mortgage. The people who can’t get financing today are many of the people who should not have been able to obtain financing during the boom. There was far too much irresponsible lending to people with poor credit who could not afford the payment. Current mortgage products allow no money down, 3.5 percent down, 3 percent down payments on condominiums, and now as little as 5 percent down on jumbo mortgages (loans that exceed $417,000).
PBN: Right now, what one thing could be done to jump-start the housing industry in Rhode Island?
TETZNER: The only fix for the current market is to improve our unemployment situation. There are far too many people either unemployed or underemployed. For us to see a substantial stabilization of the market we need jobs. Rates and mortgage lending guidelines have much less impact on someone’s decision to buy a home than confidence in their ability to pay the mortgage. If someone is confident they will have a job that allows them to afford a payment on a home, then they will buy regardless of the rate.
