Arizona Mortgage Market: Scary
Looking on the bright side of the market slowdown is getting tougher for Arizona real estate agents.
As financial problems increase for mortgage lenders across the country and lending standards tighten, several Tucson agents said they expect the number of buyers probably will shrink too.
“The market’s really scary right now,” said Pamela Young, an agent who has worked with Long Realty Co. for the past 10 years. “There’s a lot of agents who don’t even come to the office anymore.”
The collapse of Tucson-based First Magnus Financial Corp., formerly the nation’s second-largest privately held mortgage lender, is inspiring some particularly strong misgivings in the local market, agents said.
On Aug. 16, the company abruptly stopped writing Arizona mortgage loans and laid off most of its more than 5,000 workers nationwide, including about 560 in Tucson. The business later filed for Chapter 11 bankruptcy protection.
“It feels more severe because it’s right here in Tucson, and the focus is right here,” said Glenda Hawkins, a veteran agent with Coldwell Banker Residential Brokerage.
“It remains to be seen, I guess, how drastic it will be,” she said about the potential effect on the market.
Like some other troubled mortgage lenders, First Magnus encountered difficulty in selling its mortgage loans to investors on the secondary market.
Although the company has said it offered few subprime loans — those provided to buyers near the lower end of the credit-score spectrum — it did significant business in no-documentation loans, which also have been deemed risky by investors in recent weeks.
Now that lenders are cutting back on their more creative financing options, some would-be buyers might be unable to qualify for mortgages, agents said.
“I think people are really, really holding off right now, and partially because they don’t know if they can get a loan,” said Luke Adams, an agent with Realty Executives of Tucson who deals with a lot of first-time buyers.
The shock felt by local agents is apparent to Paul Dunn, president of The Mortgage Planners, a Tucson-based brokerage firm. Dunn is planning to hold a free information session for agents on the “mortgage meltdown” on Sept. 5. The session was booked before the listing ran in the Star’s business events calendar.
“There is a ton of fear out there right now,” Dunn said. The credit crunch is “going to weed a lot of people out of the real estate business. It’s going to weed a lot of people out of the mortgage business,” he said. “But the loans are still there, and there are houses that have got to get sold.”
As usual, however, many of the agents were able to point out a silver lining:
With lending standards tightening, buyers will have to be better-qualified to buy houses. And better-qualified buyers will be less likely to end up getting stuck with adjustable Arizona mortgage rates or falling into default or foreclosure.
“They have to have a good job, good credit and cash,” said Eric Schrader, owner of Century 21 First American. “If they have two out of three of those categories, we can still do a deal. The lenders were just giving people loans who had no business getting loans.”