By Paige Tepping
As housing markets across the country show signs of improvement, instilling confidence in the benefits of homeownership is still not an easy task.
Consumers remain uncertain about their household finances. Their dreams of homeownership may be alive and well, but many are cautious about acting on those aspirations. That is why it is more important than ever before for real estate professionals and mortgage lenders to work together to help homeowners and homebuyers.
To meet today’s home financing needs, Bank of America is listening to real estate professionals and their clients—all of whom are saying they want more clarity, information and control over the home loan process. The company is now hard at work bringing stability and renewal to its mortgage lending efforts, with a view toward future growth.
Real Estate magazine recently spoke with Matt Vernon, home loans sales executive at Bank of America, about the housing market, mortgage industry insights and more.
Paige Tepping: Has the housing market really turned the corner?
Matt Vernon: Based on what we are hearing from real estate professionals across the country, many local markets have much more positive activity than we’ve seen in the last couple of years. Agents tell us that multiple offers on homes are becoming more common and homes for sale are on the market for shorter periods of time. Of course there is still a great deal of room for improvement, but it seems that many potential homebuyers are moving off the fence and actively pursuing homeownership.
Economists and housing experts also have more positive things to say about the housing market. For example, my colleagues at Bank of America Merrill Lynch, who analyze housing market trends, have forecasted price increases of 2 percent in both 2012 and 2013. That’s at the national level. There are local markets that are seeing more rapid increases in home prices. At the same time, there is still a lot of uncertainty about the nation’s economy, including the outlook for unemployment and job growth—both top drivers of consumer sentiment and confidence in home-buying.
PT: What opportunities do you think potential homebuyers are missing out on?
MV: On a very general level, I would say that given the low interest rate environment we’re in and the affordability levels in many markets, it can be a great time to buy a home, both for first-time and move-up buyers. Once an individual or family has decided that they’re ready to purchase a home, one of the most important things they can do is not try to time the market. In a lot of local markets, entry level homes for sale are scarce. People may find themselves qualified for a very attractive rate on a home loan, but unable to find a property in their price range. Interest rate changes can present significant challenges to buyers and can even price them out of the market. It’s best to think about buying when the time is right personally and financially versus aiming for that elusive “perfect” time that may be easy to miss.
There are two more specific areas of opportunity that come to mind. First, purchasing a distressed property—either a short sale or an REO—using an FHA 203(k) Renovation Loan can be a great way to buy and personalize a home. Some lenders have increased their focus on renovation lending and, consequently, getting an FHA 203(k) loan is less stressful for homebuyers than it used to be. In addition, the time it takes to complete a short sale or an REO transaction has been steadily decreasing. Potential homebuyers may be pleasantly surprised to find that they can buy a distressed property at a very attractive price and make repairs all with one loan.
The second opportunity that some families may be missing is the move-up opportunity. Prices on larger homes in many local housing markets remain attractively low—typically, at or near the price levels seen in 2003 or so, before the rapid acceleration in prices. With the scarcity of entry level homes in certain markets, homeowners interested in a larger or more expensive home may discover that there are plenty of bidders eager to make an offer on their existing home. Although their home may have lost value, some may find that selling their existing home and moving up to a bigger home, at today’s lower prices and with lower interest rates, gives them a better overall outcome.
PT: What does today’s mortgage market look like from a lender’s perspective?
MV: Since the spring of 2012, the mortgage industry has been performing something of a balancing act—responding to both the boost in refinance activity and the slow, but steady, home-purchase activity.
Record-low interest rates, combined with changes to the Home Affordable Refinance Program—HARP 2.0—spurred many people to refinance their existing mortgages this year. The uptick in refinancing is great for homeowners who lowered their monthly mortgage payments. However, some lenders did experience capacity issues that led to slower loan closings.
At Bank of America, we continue to maintain our strong focus on the purchase market. With that goal in mind, we segmented operation sites by loan type and product. A homebuyer’s loan is processed at a site that supports only purchase transactions. This way refinance volume doesn’t negatively impact a buyer’s closing date.
Within our dedicated purchase market operation sites, we implemented further specialization. We now have field operations teams that are comprised of experts dedicated to a specific product. For example, an FHA loan is processed by an FHA specialist and jumbo loans are handled by a jumbo expert. This specialization helps reduce processing errors, ensures more precise underwriting decisions and achieves faster turn times.
Still, it remains the case across the industry that today’s home loan process requires more documentation and can take more time than in the past. By following a step-by-step home loan process and helping homebuyers decide how much home they can comfortably afford, lenders are taking a more responsible approach. At Bank of America, we measure our success based on whether our home loan customers succeed as homeowners over the long term.
PT: What ‘secrets for success’ have top agents shared with you?
MV: The secret is there are no secrets. Successful agents are those individuals who continuously educate themselves and learn about all facets of their local markets, including all aspects of mortgage financing—from the variety of loan products available to strategies for working with clients as they navigate the home loan process.
Learning about the distressed property market is an excellent example. Although distressed property sales have been decreasing as a percentage of all sales of existing homes in recent months, there are still plenty of opportunities for real estate professionals to build business by working with clients on short sale and REO purchase transactions. Both HUD and the Federal Housing Finance Agency are introducing changes intended to make sales of distressed properties less time-consuming and complicated. Successful agents stay up-to-date on matters like these. Bank of America is eager to help agents understand the changing environment, and our seminars and webinars are great resources for learning about regulations, various government agency changes and how these changes impact real estate professionals and their clients.
Learning as much as possible about loan products and programs is another hallmark of success. Surprisingly, there is still a strong misconception that the only home loans available are standard 30-year fixed rate mortgages with a 20 percent down payment. In fact, there are quite a few down payment and closing cost assistance solutions available for qualified borrowers with modest family incomes. At our online Agent Resource Center, bankofamerica.com/agentresources, you will find a variety of information in the Neighborhood Lending section.
A third example of how knowledge drives success? Successful agents can grow their businesses by educating themselves about the diverse needs of multicultural clients. The combined buying power of African Americans, Asians and Native Americans is forecast to rise to $2.1 trillion in 2015, representing 15 percent of the nation’s total buying power. Hispanic buying power, at $1 trillion, exceeds the entire economies of all but 14 countries in the world (according to a Nov. 2010 report from the Selig Center for Economic Growth at the University of Georgia Terry College of Business). There is vast opportunity for real estate professionals to create long-lasting relationships among diverse population segments that have a strong desire to own homes.
PT: What strategies can we expect at Bank of America in the coming months?
MV: Bank of America is making an all-out effort to stabilize, renew and grow its mortgage business. We are continuing to identify ways that we can improve. In the loan fulfillment process, we continue to fine-tune every aspect of our operation. We’re also enhancing education and training so that our expert loan originators always have the tools and resources they need to better serve customers.
We remain focused on giving real estate professionals a variety of compelling reasons to recommend us to their home-buying clients. Bank of America is committed to adding value for our 57 million customers by rewarding them for trusting us with their mortgage and personal banking business. We will succeed in both of these areas through our ability to deliver a superior home loan experience to agents and homebuyers.
For more information, visit www.bankofamerica.com\agentresources.
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