Mortgage bankers report fewer subprime woes in Mississippi

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Published: November 26,2007

Mississippi is somewhat insulated from the worst of the nation’s problems with increasing foreclosures on home mortgages, especially in the subprime market. While the state isn’t immune to concerns about the mortgage market, Mississippi hasn’t seen the drastic fluctuations in home prices that have fueled skyrocketing foreclosure rates in some of the hottest real estate markets in the country.

“We never got into the subprime business,” said Bill Edwards, president of the mortgage division of BancorpSouth. “We’re an A paper lender. We haven’t felt the slowdown. Other banks that got to where 40% to 50% of their business was in that line, they are struggling.”

Edwards said BancorpSouth’s volume of mortgage business is actually ahead of last year, and above the bank’s expectations for 2007. The only slowdown BancorpSouth has seen is what is normally experienced in the fall and winter. New mortgage activity is normally the strongest in the summer, and there is less activity in the fall and winter.

The worst problems with the subprime market have been on the East Coast and West Coast where a significant number of subprime mortgages were written at a time when real estate values were appreciating rapidly. Edwards said BancorpSouth, and most other regional and community banks in Mississippi, don’t have as much exposure.

“I think we are in better shape in the states BancorpSouth operates in including Mississippi, Alabama, Tennessee and Arkansas,” Edwards said. “Those states will fare better than places that experienced double-digit growth like Florida, where the slowdown is more severe.”

Dawn Robbins, Renasant Bank mortgage loan production manager for Mississippi, agreed concerns are greater on the national level than in Mississippi.

“Too many mortgage investors were underwriting to very low lending standards, and those situations have come back to haunt the entire industry,” Robbins said. “There were so many non-traditional/non-conforming loan programs being offered that just about anyone could get a mortgage, including those that could not verify their incomes. Due to the recent subprime fall out, most if not all NINA- (no income, no asset) type loan products have now been done away with, and we are seeing more conservative lending standards reappearing throughout the mortgage lending industry.”

Robbins said the mortgage industry in all markets has felt and will probably continue to feel some slow down, mainly due to the tightening of lending standards and the elimination of the many non-conforming products that have been offered in the past. “Credit guidelines have been enhanced and loan to value/combined loan to value products have been updated with stricter credit guidelines,” she said. “Potential clients wanting an interest-only product might find it more difficult to get approved as higher credit scores and lower loan to values/combined loan to values are now required.”

Consider the investment

Larger market areas have probably seen more housing price declines than have seen in Mississippi. Robbins said they are optimistic that the state will continue to experience modest appreciation in housing values, especially in North Mississippi where the arrival of Toyota and its suppliers should boost local and regional incomes, and purchasing a home is still one of the best investments a person can make.

“Every family needs a roof over their heads, and housing still remains the largest investment most people make during their lives,” Robbins said. “A home is a living investment as it is more than just numbers on paper. It is a tangible item that in most situations should gain value over its lifetime. In addition, mortgage rates are still very attractive with the 30-year mortgage averaging around 6% and the 15-year mortgage around 5.75%. So, now is a still a great time to invest in a home.”

There have been concerns about foreclosures as a result of uninsured Hurricane Katrina damage. There was a two-year moratorium on foreclosures that lifted in October. Hancock Bank reports it has not seen a significant number of foreclosures following the end of the moratorium. Daniel J. Zoble, mortgage division manager for Hancock Bank, said he understands that delinquencies are rising in some parts of the state. Rising delinquencies are usually accompanied by increased numbers of foreclosures.

There has been some concerns voiced that having so much media coverage of problems with the subprime market and a slowdown in housing have resulted in discouraging people from buying homes. Zoble said he doesn’t think the subprime concerns are discouraging qualified borrowers.

“However, the fact that home prices are dropping may very well be causing some buyers to wait a few more months,” Zoble said. “The mortgage market cooled off in Central and North Mississippi beginning around April. In about mid-July, the market began to taper off here on the Coast, as well.”

The primary impact in Mississippi from the subprime mortgage meltdown and its contagion into all forms of lending and investing has been associated with significant tightening of mortgage eligibility standards and affordability for subprime mortgages, alternative documentation and prime jumbo mortgages, said Breck Tyler, executive vice president, mortgage services manager, Trustmark National Bank.

“However, there has been a minimal impact in Mississippi for lending on prime mortgages with sufficient documentation,” Tyler said.

‘Uniqueness of Mississippians’

Tyler said it is important to remember that over the past several years, Mississippi has enjoyed a healthy, growing economy throughout most of the state. Home and commercial construction, along with permanent home financing, experienced low levels of delinquencies and foreclosures in relative terms.

“Therefore, any slowdown in home construction coupled with a temporary increase in housing inventories does affect our market,” Tyler said. “With respect to Katrina, government and certain government-sponsored entities’ moratoriums on foreclosures have already been or will be lifted by year-end, depending on the entity and area. At this time, we do not see or anticipate a significant rise in foreclosures due to Katrina.

“As a comment related to Katrina and Mississippi in general, many of our national investors, partners and other interested parties have frequently commented to me on the uniqueness of Mississippians to pull together to assist each other in times of uncertainty. There is obviously a sense of community, pride and hard work in the reestablishment of families, businesses and communities. I personally believe this unique characteristic of Mississippians provides our state with a tremendous advantage for consistent and continued economic growth.”

While the slowdown in home sales and new home construction has had a sobering effect on potential buyers, Tyler said the difference between Mississippi and other markets in the country is that it has temporarily slowed in Mississippi and it virtually stopped in other areas of the nation.

“So much of the uncertainty and extreme fear that is being communicated by the national media really has no fundamental cause and effect from the performance of housing in Mississippi,” Tyler said. “It is complicated, and there are many variables that are contributing to the national credit crisis. The initial concern and perception by investors was that a weakening national real estate market coupled with billions of dollars of recently originated subprime adjustable rate mortgages would substantially increase the amount of future foreclosures and further deteriorate the housing market and overall economy.

“True or false, perception is reality on Wall Street, especially when you combine extreme uncertainty into the equation. Due to this foreclosure fear, global mortgage investors have become reluctant to purchase these Wall Street-created investment vehicles that are highly complex securities and derivatives, which are collateralized by those subprime and other related mortgage and commercial loans. With the absence of real buyers for these investment securities, Wall Street and other institutions are experiencing massive asset write-downs of these complex mortgage securities since value is now being determined by computer models instead of actual buyers.”

But the bottom line in Mississippi is the economy in Mississippi is good, mortgage rates are low and people are still buying houses. Trustmark’s purchase mortgage volume is encouraging and has increased over the past several months.

“People are realizing that this is a great time to buy a home in Mississippi,” Tyler said.

Contact MBJ contributing writer Becky Gillette at bgillette4@cox.net.

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