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Mortgage filings down in first quarter

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ERIC SMITH | The Daily News

What goes up must come down. As far as mortgages filed in Shelby County are concerned, that old adage appears to hold true.

Between January and March, 13,604 mortgages were recorded at the Shelby County Register's Office, according to The Daily News Online, www.memphisdailynews.com.

That figure, which includes first and subsequent mortgages on both residential and commercial properties, represents a 6.9 percent decrease from the 14,613 mortgages filed in first quarter 2006.

Of course, the 2006 data marked an 11.8 percent increase from the 13,072 filed in first quarter 2005, which in turn happened to be down from the nearly 16,000 filed in first quarter 2004.

But why this current dip? With the prime rate at 8.25 percent and 30-year, fixed-rate mortgages as low as 6 percent, interest rates are not to blame.

"We're still in a good interest-rate environment," said Michael Wiegert, vice president of Wachovia Mortgage Corp. and president of the Memphis Mortgage Bankers Association. "We haven't seen a lot of fluctuation, really, for the last year or so. Just a little bit up or a little bit down, so I don't think that's driving any decrease in the filings."

Luxury of choosiness

Despite the overall decline, Wiegert said business at his company has been up the past three months. Still, he acknowledged the countywide decrease and attributes it, at least partially, to a surplus of homes on the market. A buyer's market - whether it's real or perceived - can mean prospective buyers are being patient about when and where they purchase.

"A lot of times, they're going to wait and find the best deal," Wiegert said. "And people who are thinking about selling aren't going to put their house up for sale because they feel they can't get full value for it. Therefore, it may cause things to slow down a bit."

Wiegert pointed out that whatever slowdown has occurred in early 2007 can be traced back to the low mortgage rates four years ago that prompted a slew of refinancings. The market is still returning to normal.

"In 2004, you were on the tail end of the big refinance boom," he said. "Rates really bottomed out in June 2003, when they were at the lowest they'd been in 30 years or so. When you got to the middle and latter part of 2004 is when things really started to slow down.

"There's not too many people refinancing right now. We've been saying for the last couple of years that that was part of the reason for a decrease in filings, too."

Pop goes the bubble ...

It's important to note that the decrease has been minor, most mortgage lenders said. Things are far worse in other parts of the country, where bubbles continue to burst.

"Memphis tends to be a steady market," Wiegert said. "Memphis' economy is very service-oriented and we tend to be pretty steady as she goes, as opposed to some of the big roller coaster rides like you might see in parts of California, parts of Florida and parts of the Northeast."

Like Wiegert at Wachovia, Jo Garner of First Tennessee Home Loans hasn't seen firsthand any kind of slowdown.

Though it helps to work for a large lender that can offer a variety of mortgage loans for borrowers, Garner likewise credits the Memphis market for relatively small peaks and valleys.

"You can buy more house for your dollar in Memphis than you can in most areas of the country," she said. "We're an undervalued market. We do not see precipitous appreciation or precipitous depreciation in our real estate. What we have going for us is a stable market. Overall, we appreciate steadily but not precipitously."

Mortgages of $100,000 or less had the lion's share of non-commercial borrowers' filings in the first quarter, keeping with a trend that's held over the past two years. Of the 13,604 first-quarter filings in Shelby County, 3,573 - or 28.1 percent - were between $50,000 and $99,999. And 3,276 loans - or 25.7 percent - were between $10,000 and $49,999. Those figures include first and subsequent mortgages with non-commercial borrowers.

Note that non-commercial borrowers differ slightly from non-commercial loans. For instance, a company (a commercial borrower) could finance a non-commercial property, such as a house; likewise, a group of individuals (non-commercial borrowers) could finance a commercial structure, such as an office building.

How the players play

Many other factors have played bit roles in the first-quarter mortgage decline. Meribeth LaBarreare, vice president and senior loan officer at 1st Trust Bank for Savings, noted how a drop-off in filings here was borne of more filings in neighboring counties.

"The flight to Fayette County and Tipton County is big because of the property taxes," she said. "The taxes are less than half in Fayette County than they are in the City of Memphis and Shelby County."

LaBarreare also cited predatory lending laws, which are forcing lenders out of business and giving potential homebuyers fewer options for financing a home.

"I think that's really a big key as to why not as many people are buying," she said. "The subprime lending is still out there, but the guidelines have gotten harder."

Yet another factor is the sharp decline in Adjustable Rate Mortgages (ARMs). As Garner pointed out, they aren't nearly as attractive as they once were.

"Normally, your short-term rates are much lower than your long-term rates," she said. "But, right now, because prime is up at 8.25 (percent), you've got long-term, 30-year rates at around 6 (percent) and 6.25. It's just not advantageous for people to jump into these adjustable rates. It's cheaper for them to go ahead and get a fixed rate."

Land of opportunity

All told, mortgage lenders observed that the decline wasn't unusual and didn't portend any future doom. First, they all said they believe rates will continue to stay where they are.

"We're going to see them remain relatively low this year because no one wants to upset the housing market," Garner said.

Second, the warmer months should bring a flurry of home buying.

"We certainly expect to see filings increase the second quarter of this year over the first quarter of this year because things pick up in the spring and summertime," Wiegert said.

Last, the Memphis market tends to go its own way, leaving mortgage lenders optimistic about the market and its ability to bounce back up after being down.