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Local mortgage brokers feel effects of credit crisis
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Friday, October 3, 2008 10:29 AM EDT
Argus-Press Photo by Michael Peterson Bill Grantham talks on the phone as he works at his new job at Top Flite Financial in Owosso. He was formerly the chief executive officer and president of Grantham Mortgage Corporation in Owosso. The economy forced the business to close Sept. 26.
OWOSSO - Bill Grantham had been the chief executive officer and president of Grantham Mortgage Corporation in Owosso since 2002.
This past Friday, however, he had to close his business and move to Top Flite Financial - and he feels the economic problems are to blame.
“The economic situation was bad enough for me to not continue to stay in business,” Grantham said, who works as the branch manager at the Owosso Top Flite office. “I am no longer self-employed in the mortgage industry.”
Grantham said by the time he had to close down, he was working his business alone because of downsizing.
It is no secret the economy has been lagging, not only in Michigan, but also throughout much of the country.
Unemployment in Michigan is nearly 9 percent, with automakers continuing to cut back. To make matters worse, the Detroit housing market is among the worst in the nation.
Adding to the stress, the $700 billion bailout package rejected by the House of Representatives Monday by a 228-205 vote caused the Dow Jones industrial average to drop 777 points - costing Americans billions in the stock market overnight. It was the largest single-day point decline ever.
With news that the Senate is to vote on a new rescue plan today, the Dow rebounded upwards 485 points Tuesday.
Most agree, however, that the economy was in trouble before Monday.
“The No. 1 thing that has affected the business is the job situation here in Michigan,” Grantham said. “It was hard for us to verify income, naturally, which resulted in fewer loans being approved.”
Another factor is the gas prices, which have steadily climbed since 2005 when Hurricane Katrina slammed into the Gulf Coast.
“The gas prices have directly affected the industry as far as transporting merchandise to the various businesses, which has a chain effect on everything,” said Grantham, who has been in the business for about 22 years. “For the people who were trying to work, it reduced their spendable income. In turn, a lot of folks lost their homes because they couldn't afford their mortgage payment and put food on their table.”
James Jordan, owner of Allstate Mortgage Services LLC in Durand also has been worried about the economy.
“There are no jobs here. They ship all those jobs overseas and they expect people to buy stuff,” Jordan said. “Also, if the market goes down and people get scared to spend, it will indirectly affect us negatively.”
Jerry Meyer, the president of Metro Mortgage of Owosso, was cautiously upbeat, saying mortgages are not out of question for all blue-collar workers.
“There is still plenty of money available for the average to above-average borrower. If somebody has W-2s, pay stubs and they have reasonable credit, they are going to be able to get a mortgage,” Meyer said. “I think the media is over-dramatizing the reality of our local marketplace, that is for certainŠI think it is a great time to buy a house. The house prices are low and there are deals available.”
Charles Dahl, a mortgage consultant for America Mortgage Corporation, agreed.
“How this really affects Main Street is yet to be seen,” Dahl said. “It's a great time to buy. Prices and rates are fantastic; you can still get loans...But they are being much more detailed on what we have to get in order for people to get loans.”
But that doesn't mean that industry hasn't had to adapt. He said the market seems to be switching more to government-backed programs, such as USDA Rural Development (USDA-RD) and the Federal Housing Administration (FHA).
“The government programs were very low components a couple of years ago, but they are turning into a very high percentage of deals being done now,” Meyer said. “A few years ago, FHA was only about 3 percent of the market. Now I suspect it is over a third of the market.”
He added people with heavily bruised credit ratings also may find it more difficult to get loans. The affect of bankruptcy and foreclosure are much more damaging, he continued.
“It used to be one day out of bankruptcy you could write a mortgage,” Meyer said. “Now there are seasoning times being imposed.”
Meyer said thanks to current technology, his company is able to calculate what people can do to improve their credit scores with 92 percent accuracy.
“We have now become very sophisticated in that field. We can tell people specifically what they need to be doing to get their score up to the minimum,” Meyer said.
The one thing everyone agrees on is that the government needs to do something to help with the financial crisis.
“If they don't do anything, and they sit on their hands, it will affect us,” Dahl said. “This was started by greed, which knows no political party. Greed is what got us into this.”
- Contact Michael Peterson at 725-5136 extension 223 or mpetersonarguspress@gmail.com.
