Minimal impact seen in area from national subprime mortgage fiasco
By CATHI AYCOCK
For Williamson A.M.
Article Online
The jumbo mortgage is like much of the Williamson County real estate market: big, expensive and popular. At least, popular for now.
A jumbo mortgage is defined as any one-family loan for more than $417,000. A conforming, or conventional, loan is for a mortgage below that amount.
"No doubt we have more jumbo mortgages here in Williamson County than in other areas. The houses are more expensive, so if you are looking at a million-plus home, even if you bring a good bit of cash to the table, you are looking at a jumbo mortgage," says Patti Ellsworth, mortgage loan originator with BancorpSouth.
How jumbo loans have been or will be affected by the recent negative news of subprime mortgages remains to be seen, but Eric Waechter, vice president of Fountain Street Mortgage in Franklin, says the impact here should be minimal. A subprime loan is one allowed to a borrower who doesn't qualify for a conventional loan. Nationally, there has been a surge in foreclosures for this type of mortgage.
"The media, Fox, CNN are predicting the whole subprime fiasco is going to impact jumbo loans. There is a trend in national media to predict doom and gloom," he says. "But the bottom line is, not all jumbo rates are going up.
"Williamson County is a different market from even Davidson County. And the headlines you read are not about this market at all. We are still healthy."
Waechter, who said the subprime rate for Fountain Street was lower this month than last month, says that 112 lenders have gone out of business since May 2006. And consumers should take that as a positive sign.
"It was the Wild West of lending. Now lending is back to normal. The big, national lenders will come back stronger than ever. This was not a surprise to Wall Street and the banks. They knew it was coming. It was sort of like the dot-com craze. But the rates that are out are still good. The market, especially in Williamson County, is still healthy."
Susan McKinney, president of the Williamson County Association of Realtors and an agent with Crye-Leike in Cool Springs, says that the jumbo market has slowed here but adds that rate increases and consumer fears play a very small role.
"I think we are seeing less speculative buying — the buyer who wants to buy a house, live in it for two years and then sell. That buyer might be impacted by the rates increasing. But the big reason we are seeing a slowdown for the jumbo is because the relocation market has slowed.
"For someone in good financial shape, if they are looking at a million-plus house, the mortgage rate is not the defining point for the decision."
McKinney says while the jumbo loan market has slowed, so has the conventional loan market.
"We are likely to feel a small impact on rates. But unlike other areas with tremendous sub-prime loans, we are pretty healthy with a savvy consumer here in Williamson County."
The overall impact on the mortgage industry remains to be seen, the professionals say.
"This is going to shake out the lenders who don't need to be in the industry; less than credible people," Ellsworth says. "I work hard for the clients I serve, and I want the industry to reflect the standards I know to be ethical. All this is doing is self-correcting. And I think, to some degree, we are not feeling the heat in Williamson County the way other markets are.
"We didn't see that much sub-prime activity here," Ellsworth said. "But a few times I would tell folks, 'Look, you need to think about this. You can afford this loan today, but it is not really wise.' I played mother to some young folks who were biting off too much."