Where Are The Apps?
LAS VEGAS-Record low mortgage rates have done nothing to stop a renewed housing slide, as new home sales fell to record lows in May and both refinance and purchase volumes fell throughout June.
"There's a bit of a fear in the marketplace and people don't want to do anything," said Bob Dorsa, president of the American Credit Union Mortgage Association. "I think it's a psychological reaction and the result is no lending."
A robust market in the first quarter of the year had buoyed hopes of a housing recovery, but it appears the first-time homebuyer's tax credit was a primary driver; since its expiration new home sales were down 32.7% in May to an annualized rate of 300,000. That's the lowest rate since record keeping began in 1963.
Credit unions have been left to watch the market change almost overnight, even as average 30-year fixed rates fell on the 30-year to an average 4.69%, the lowest since Freddie Mac between tracking rates in 1971. The previous record of 4.71% was set in December.
The 15-year average fell from 4.20% to 4.13%, also a record low.
ARM rates have also moved near record territory, with the average for the five-year ARM falling from 3.89% to 3.85% and the average for the one-year ARM dipping from 3.82% to 3.77%.
Rates Have Fallen Over Last 2 Months
Mortgage rates have fallen over the past two months. Investors wary of the European debt crisis and the turbulent stock market have shifted money into the safety of Treasury bonds, driving down yields. Mortgage rates tend to track the yields on long-term Treasury debt.
David Whitcomb, mortgage manager at Waynesboro, Va.-based DuPont Community Credit Union, noted a significant increase in purchase applications at the start of the year, running through the spring, but "as soon as that tax credit expired, we saw applications drop from 52 applications in April to just 29 in May."
Refinances have also hit the skids even as rates are falling below levels seen during the "mini-boom" of 2009. "If you know you don't have enough income to make your mortgage payment now, you probably won't be eligible for refinancing," said Whitcomb.
In Alabama, Anita Domondon, VP with Meriwest Mortgage noted, "With the Fannie Program you can only refinance up to 120% and some people are more underwater than that."
The notion of a housing double-dip is starting to take hold in some circles, including credit unions. And while CUs across the country have gamely offered workout loans and debt-restructuring programs, the rock-bottom rates have left many inflexible on mortgages.
"The problem for CUs is that we can't really portfolio these mortgages because of the interest rate risk," Domondon explained. "What we originate has to be sold off to the agencies."
Community Involvment Is The Key
The only strategy that will counteract the tend, these three all agree, is the long-term effort of getting more involved in the community and taking the message directly to those who showcase the homes.
"We have to get accustomed to dealing with Realtors, telling our story and getting respect, to get in the game more or less," said ACUMA's Dorsa. "I think people want to take advantage of the opportunity, there are some educational things we could do [to help]."
DuPont Community CU is trying to do just that, Whitcomb noted, as mortgage originators and senior management have met with a number of Realtor groups and are fixtures at related association meetings. The $727-million institution is planning to push mailers this fall and a build a microsite dedicated solely to mortgages.
"If you can qualify to purchase a home, it's absolutely a great time to purchase," said Whitcomb "Who better to trust than your credit union to help you buy a home?"