Gloomy outlook from top mortgage pros
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Despite sub-5% loan rates and signs that home prices have bottomed out in some places, mortgage industry leaders at a conference in San Diego seemed decidedly downbeat when asked to get out their crystal balls for the economy and the industry’s prospects over the next year.
Charles E. Haldeman Jr., two months into his new job as chief executive of Freddie Mac, said he saw no signs that businesses – even those on solid ground – were going to start rehiring employees any time soon.
On the consumer spending front, the big driver of the U.S. economy, Haldeman sees a ‘permanent dislocation in consumption patterns.’ It was unclear exactly what he meant, but there was no doubt that it wasn’t good for home sales.
Fannie Mae CEO Michael J. Williams said lenders and loan investors would have to be judged on how effectively they dealt over the coming year with the messes they created through loose lending during the boom years. The focus will continue to be on limiting losses by trying to keep borrowers in their homes.
‘We’ll all be rightfully focused on modifications and refinances,’ Williams said. ‘But to get the housing market moving again, it’s all about getting people to buy homes.’
Dean Schultz, chief executive of the Federal Home Loan Bank of San Francisco, said he hoped things would look better in a year, but he wasn’t optimistic about that.
‘I think we’re at the midpoint of a difficult period,’ he said, ‘ which will stress all organizations.’
The comments Monday came at the Mortgage Bankers Assn. annual meeting in San Diego, which continues today with speakers including Barbara Desoer, president of Bank of America’s home lending and insurance operations.
In an interview, Desoer said more than 40% of Bank of America’s new mortgages are for home purchases. But that doesn’t mean a universal recovery in housing, only that prices have been beaten down so far that in some markets – particularly lower-priced areas where values have fallen the most – first-time buyers and investors are stepping in to buy perceived bargains.
Those areas include inland areas of California, but not certain other battered areas, Desoer said. In Florida, for example, another big boom and bust state, there’s no sign that the bottom has been reached anywhere.
Economists at Charlotte, N.C.-based Bank of America, which collects payments on more mortgages than any other lender, think prices nationally have another 5% or so to fall before bottoming out – perhaps – in the second quarter next year.
And then, Desoer said, a slow and uncertain recovery may unfold. She said the bank would be on guard for a double-dip recession or what could be a replay of the ‘stagflation’ of the 1970s – a stalled economy with inflation.
-- E. Scott Reckard