Thought I would chime in on the state of the mortgage business in the area. As many of you have heard, National City is the latest ( and I'm sure not last) to drop a bomb on the West Michigan economy. They are no longer wholesaling home equity lines. This follows the news from American Home Mortgage and Heartwell Mortgage closing up shop due to the downturn in loan activity.
It is quite surprising to me that respected names like National City, Heartwell, and AHM are the ones to announce problems. I always thought it would be the known bottom feeders in the industry that would be the first to go. Does anyone remember CommonPoint?
What this boils down to is necessary market correction. The dot.com industry went through this in the late 90's to early '00s and the wheat separated from the chaffe. Good lenders like National City are becoming more conservative, (and quite frankly may be positioning themselves for a buyout) in their lending practices. A much needed move in my opinion. Easy money has been floating out there for several years and lenders are wising up to it.
The salad days of easy, record pace home sales and quick refis are over. The market will now be driven by life factors for many years to come. What are life factors? Births, deaths, marriages, divorces. Add now to that a record pace of foreclosures and bankruptcy, and there will be buyers and sellers in every market.
Now may be a good time to start watching for good income properties. The biggest slingshot effect that I see are rental rates going up. Why is that? Simple. As lenders tighten their requirements for approval on loans and do away with the no money down, sign and drive programs, marginal credit borrowers will be forced to rent instead of buy. With it still a buyer's market for investment properties, and the potential for rates to rise, cash flow situations will improve.
Investment buyers should prepare themselves however, since the zero down investment property loans are also becoming a thing of the past. 10% down payment will probably become the norm. Portfolio owners should consider talking with a commercial lender to use any equity in current investment properties to bundle everything in to a commercial loan.