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Mortgage Group Says Psychological Effect Alone Could Sink Consumers
Posted By beth On August 20, 2007 @ 2:05 PM In Consumer News and Advice,Financing a Home | Comments Disabled
By Amy Hoak, MarketWatch
RISMEDIA, August 21, 2007—(MarketWatch)—There’s more at stake in Countrywide’s health than the future of the company — if it isn’t able to keep making loans, the psychological impact of the loss would be felt directly by consumers, participants in a California Association of Mortgage Brokers news conference said on Thursday.
“The consumer will feel that there is no loan availability if companies like Countrywide can’t keep their doors open. This isn’t some small company that decided to start up yesterday that had a risky business plan. This is America’s leading lender,” said Ed Craine, the public relations chairman of the group.
“The credit crunch is working its way through the whole market, taking companies we’ve seen as solid companies that nobody would ever expect to have problems and putting them on the brink of disaster.”
As it is, certain mortgage products have been drying up and lending guidelines have been tightened — “changing almost hourly,” as the California group said in a news release. Lenders who have shut their doors this year have also reduced consumer options.
The problems Countrywide is having are proof of the depth of the market’s current troubles, said John Marcell, who served as the group’s president from 2005 to 2006.
“It just goes to show you the state that the market is in right now when you have the largest mortgage lender in the United States having these kind of difficulties,” Marcell said. “We’re going to have to get some relief some place to keep companies like this still in business.”
The news conference, held at the group’s annual convention and teleconferenced to journalists throughout the country, was held to discuss the current lending problems and possible solutions for California residents.
Major wholesalers have largely discontinued teaser-rate, subprime mortgage loans, said Joe Falk, the legislative chair of the National Association of Mortgage Brokers, and a participant in the news conference.
Prices also have recently risen significantly in the jumbo loan market because of the perceived risk, he said. Jumbo mortgages are nonconforming mortgages that cannot be bought by Fannie Mae or Freddie Mac. The conforming loan limit is $417,000.
To address one of the problems at the state level, the California group is seeking that the state be designated a “high cost” state for housing. While most of the country must abide by the $417,000 maximum conforming loan limit, properties in Alaska and Hawaii are eligible for higher limits. California wants to be included on that list.
The group also is asking for all loan servicers to be more responsive to homeowners who are concerned about not being able to make their payments and make a call to them at the first sign of trouble.
“The feedback we’ve been receiving from our homeowners is that they’re (servicers) non responsive when they do call,” said Ed Smith, the government affairs chairman for the California group. The group is encouraging servicers to extend their hours of operation and to “put a human face on individuals who are calling,” requesting help.
“When someone reaches into their heart and says ‘I’m about to lose my home, who can help me?’ they’re looking for someone on the other end to be empathetic, sympathetic and responsive,” Smith said. “We’re asking, we’re pleading for our servicers and our secondary market participants and industry partners to come up with aggressive programs to keep individuals in their homes.”
Amy Hoak is a MarketWatch reporter based in Chicago.
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