I counted 250 Realtors in the Virginia Suiteat NAR's Mid Year Meetings this morning. While the keynote speaker, Sheila Bair of the FDIC, spoke first of the administration's views about subprime loans I was most interested in the discussion that followed.
Guy Cecala, Publisher of Inside Mortgage Finance was joined by Broker John Veneris and Broker Danette O'Neil in a panel discussion and Q & A about subprime loans and their effect in the marketplace. Cecala pointed out that while subprime loans made up maybe 13% of all loans seven years ago, now they equal conventional mortgages in the marketplace. In particular he opined that buyers with scores under 650 and little or no equity are in real trouble. Specifically, loans made with little equity and buyers stretched to the limit to make the house payments are likely to default early. If these types of loans will most certainly move quickly to foreclosure when an adjustable rate kicks in, or a teaser rate phases out. The reaction of the standing room only audience was audible. It seemed that every agent in the room had experience in their marketplace with this growing problem. Cecala told the room that he foresees growth in 40 to 50 year mortgages to help solve this problem.
John Veneris spoke as the Chairman of the NAR Subprime Lending Work Group and as the broker of the Realty Executives office in Downers Grove, Illinois. (disclaimer, John is a friend of mine and a member of MORe) NAR is reviewing its policy and looking seriously at the subprime market with an eye to corrective legislation. It is inevitable that legislators will begin to explore all sorts of options as homeowners default on loans and foreclosure rates begin to rise. In short, NAR is looking to encourage government action against the "bad actors" in this market, but safeguard the flexibility of some subprime options.
Lastly, Realtor Danette O'Neil from New Orleans brought down the house with a rousing speech about how useful subprime loans are in both the minority housing market as well as in rebuilding New Orleans in the aftermath of Katrina. I hope that O'Neil's comments are made available online for all members to experience. Her articulate, passioned, and witty take on this sometime dry issue was a breath of fresh air.
The following question and answer session clearly demonstrated that Realtors are frustrated and looking to see changes to this type of mortgage practices.
I will be attended many more meetings at the Mid Year meetings and hope to improve my novice blogging skills in the process. Please feel free to leave constructive comments and suggestions.