Realtors say lending practices holding back housing recovery

stevebrown@dallasnews.com
A rebound in the housing market is being held back by stingy lending standards, the president-elect of the National Association of Realtors said Thursday.

Irving real estate agent Charles McMillan – who takes over as head of the 1.3 million-member Realtors association later this year – faults mortgage companies for keeping some potential homebuyers out of the market.
"All of the relief that's been given to the banks in the marketplace has not trickled down to the consumer," Mr. McMillan said at the annual meeting of the National Association of Real Estate Editors in Dallas.
"What they have done is raise fees and make qualifications almost impossible for people to get loans," he said.
In particular, Mr. McMillan criticized the high costs of so-called jumbo loans – mortgages of $417,000 and more – that are chilling buyer demand in many markets. Interest rates on such mortgages now are much higher than those on smaller loans.
And Mr. McMillan said that in some depressed housing markets lenders are raising costs even higher to homebuyers and making it tougher for them to qualify for loans. "That stigmatizes properties unfairly," he said.
The National Association of Realtors is forecasting a slight improvement in nationwide home sales in the second half of 2008.
"In 2009, we anticipate a 6 percent increase going up to 5.7 million homes sold," he said. "In many markets, we are already on track for that and moving beyond.
"In the housing market we have a pent-up demand throughout this nation," Mr. McMillan said. "Interest rates are lower than they have been for many, many years."
But he acknowledged that across large parts of the country, housing markets are still in turmoil.
"We have consumers angry that they can't sell their homes," Mr. McMillan said. "America is hurting now."
On Thursday, the House of Representatives passed a broad housing relief bill that includes tax credits of up to $7,500 for first-time home buyers. However, the White House has threatened to veto this legislation, which awaits action in the Senate.
"A tax credit would quickly lift home demand and lessen foreclosure pressures," Mr. McMillan said.
For their part, big lenders say they are trying to respond to the housing crisis.
Federal Housing Administration commissioner Brian Montgomery said his agency has already provided help to more than 200,000 Americans with troubled home loans.
And he said that a recent increase in the price of home loans that the FHA can insure would make it easier to buy and sell more expensive homes around the country. The bill passed by the House would make this increase permanent.
"We believe that the new temporary loan limits will help more than 100,000 homeowners," Mr. Montgomery said.
The House bill also would let the FHA take on up to $300 billion in additional mortgages. Mr. Montgomery said he's against some of what the House just agreed to. Proposed legislation would send $15 billion to states to buy and fix up foreclosed property.
"That would primarily benefit lenders," Mr. Montgomery said.
He said some of the costly housing relief plans being debated in Washington, are not "fair to American taxpayers who had no part in the subprime loan market."
Mortgage Bankers Association senior vice president Steve O'Connor said lenders have been "ramping up their capacity" to help homeowners with problem loans, he said, while admitting "it's a challenge."
Mr. O'Connor said that recent sharp cuts in interest rates have helped homeowners with adjustable-rate mortgages who were facing big increases in payments.
"The payment shock that would have been in place a year ago is much less severe," he said.
The big concern now is that many homeowners have little or no equity in their houses.
"They owe more than their home is worth – that's the problem," Mr. O'Connor said.
Debbie Dunn, executive vice president with Dallas-based CTX Mortgage, said "The housing market could still be 18 to 24 months away from a total recovery.
"Declining home values are at the core of the confidence crisis," she said. "They make potential purchasers decide to sit on the sideline."
Buyers are also facing new obstacles.
"In certain markets, mortgage insurance has become practically unobtainable," she said.
That means that homebuyers are forced to come up with a much larger – and for some unaffordable – down payments.
Ms. Dunn said despite all the headlines, most neighborhoods in America are stable.
"Over 90 percent of all homeowners either don't have a mortgage or are making their payments on time," she said.
The Associated Press contributed to this report.