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|Mortgage loan officers say now is time to buy|
Local bankers agree now is the perfect time for people to buy a home in northeast Louisiana.
For people who have good credit and are looking to enter the housing market in northeast Louisiana, local bank officials say they should not be intimidated by what they hear and see on the national scene.
Tom Trahan, vice president of Monroe's Bankers Mortgage Center, said there exist housing markets scattered throughout the country that are considered "declining markets" in the home loan business.
"Monroe is not in a declining market," he said. "New Orleans is a declining market and some of that stretches to Baton Rouge. For the most part, here, we are not considered a declining market."
"Our area, we're as busy as we can be," Trahan added.
Local banks are making loans to people with good credit at a 4.75 interest rate for 30-year mortgages, Trahan said.
"That's as low as they've been in a long, long time," he explained. "I've been in the business almost 25 years, and they've never been this low. If you are in the market, and you have good credit and have some money for a down payment, and with 4.75 interest rates, it's absolutely the best time, right now.
"We're making loans to people with good credit just like we always have. That hasn't changed a bit. And, we're doing more of them because the rates are so low.
"We're refinancing people like crazy. This is the busiest we have ever been. But, if you listen to the national media, you'd think you'd be lucky if the (bank's) door was unlocked."
Of course there are people who worry they may not have a job in six months, and that is a legitimate reason not to enter the housing market, he said.
"But if you feel good about your job, then now is not the time to sit on the sidelines," he said.
Lonnie Scarborough, executive vice president and chief retail banking officer for Community Trust Bank, agrees that now is the perfect time for people interested in obtaining a home loan.
"It couldn't be any better," Scarborough said. "You can get a 15-year to 30-year loan at 4.50 percent to 5 percent which is outstanding.
"When the rates came down, that really drove the volume back into the mortgage arena," Scarborough continued. "Right now we are at some historic lows, and people are responding. For example, January and February, in our mortgage department, we had our two best months ever on record. We're not seeing what is happening nationally."
There's no doubt there is serious trouble economically in certain parts of the country, Trahan said, referring to the housing crisis. But here in northeast Louisiana and the Monroe region, the local market is not seeing those problems, he said.
The northeast Louisiana region is "pretty insulated" from the type of trouble that's occurring in other parts of the country, Trahan said. Those areas include parts of California, Nevada, Arizona, and Florida, among others.
Scarborough said many of the banks that made poor lending decisions are not located in northeast Louisiana.
"Banks around here didn't make those mistakes, so therefore, you are not seeing housing values plummet 63 percent," Scarborough said.
According to the Federal Housing Finance Agency, which tracks home values in metropolitan statistical areas, the Monroe region ranks No. 2 out of 292 metropolitan areas for house price appreciation in 2008.
"There's some other things in the works in northeast Louisiana and northwest Louisiana, so it's a good time to be in north Louisiana," Scarborough said. "A few years ago you wouldn't have really celebrated that, but right now you will."
Despite what has happened to the local economy over the past several years, the local housing market remains strong, Trahan said.
For example, Trahan said business is still good in Bastrop following the closure of International Paper.
"We have branches in Bastrop, and we do a lot of loans in Bastrop," Trahan said. "We won't be able to do as many as we did in the past because of what happened with IP. But our person who covers Bastrop is as busy as she can be."
He said Monroe's economy is much different than other economies, even those in other parts of the state.
"It's different than Lafayette's economy," he said. "It's not going to boom and bust on the oil business. It never gets great, like Lafayette did in the 1970s, but it's never gotten really creamed either," Trahan said. "Monroe is pretty steady."
Regarding people qualifying for loans, Trahan said there have been changes as banks have returned to more traditional lending practices.
Over the last 10 years, Fannie Mae and Freddie Mac switched to automated underwriting systems.
"They would get your credit score and look at your credit profile and look at how long you've been on your job, how much you make and what you owe," he explained. "All the same things you would do if you were manually underwriting that loan. But, what ended up happening was, the computer was a lot more liberal than what an underwriter would have been.
Also during this time, he said Congress mandated that "everybody get more liberal" with home loans to "put more people in houses."
"Unfortunately, it got to the point where people thought everybody could get a house," he said. "It's unfortunate that Congress mandated the standards be lowered."
Eventually, it got to the point where people were getting 95 percent loans, and when it became evident the people could not pay their monthly mortgage, they simply walked away, Trahan said.
"If they had put 20 percent to 30 percent down, they had some skin in the game, and they wouldn't just walk away from that thing because they had $30,000 invested in it," he said. "They would figure out a way to make the payment. But with 95 percent loans, they didn't have any skin in the game and they didn't have any reason to pay you either. They would call you up and say the keys are on the counter in the kitchen."
Also, during this timeframe when financial institutions were pushed to make loans to people with poor credit, institutions "mitigated the risk by jacking the rate up," Trahan said.
"That doesn't really help that guy who pays his bills on time," he said. "Having a rate that's 2 percent higher than the going rate isn't the trick that will put him on a different path."
He said many mortgage brokers took advantage of this because money could be had by making loans at 2 percent higher than the going rate.
Also, Scarborough said some borrowers were not honest with themselves about what they could afford over the long-run.