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Interest rates chief real estate worry

May 12, 2004

Yet mortgage brokers remain upbeat about business, survey finds

By Samantha Peterson
Inman News

Mortgage broker Ginger Engle isn't overly concerned about interest rates because she doesn't believe they'll go up quickly enough to have a big effect on her business. But rates are definitely a topic she hears a lot about.

"The customers are more worried about it," said Engle, who works for Monarch Mortgage in Asheville, N.C.

That intense interest in loan rates echoes views expressed in "Gray Skies or Sunshine?" a recent survey of mortgage brokers conducted by Informative Research. Eighty-six mortgage brokers from various states completed the telephone survey, which asked them about their top concerns for this year and how they have positioned themselves for changes in the market.

The survey findings may not be applicable to the mortgage industry as a whole, but can serve as a tool for understanding the thoughts and concerns of today's mortgage brokers, researchers explained.

The survey was prompted by fluctuating interest rates, pending legislation and other industry changes, said Jeff Lau, marketing director for Informative Research. The National Association of Mortgage Brokers estimated that mortgage brokers originate more than 65 percent of all residential loans, which makes their thoughts on the industry interesting to lenders and others involved in real estate, he said.

"Their perspective makes a huge difference in where the industry's going," said Sarah Ross, communications and marketing representative for Informative Research.

The second most-pressing issue on mortgage brokers' minds was reform of the Real Estate Settlement Procedures Act. However, the study was conducted before the U.S. Department of Housing and Urban Development withdrew its proposed changes to the rule.

Other concerns included pending or recently enacted legislation and regulations, housing affordability and marketability, and lender-related issues, such as programs, service and reliability.

Despite those concerns, most brokers surveyed remained upbeat about the coming year, Lau said. Brokers don't think the changes will have much effect on their business.

In fact, responses showed only a small difference between brokers who thought their loan production would increase during the next year (43.5 percent) and those who believed their loan production would decrease (49.4 percent). The remainder (7.1 percent) gave no answer or predicted no change.

"The thing we found most surprising was the resiliency of the brokers," Lau said.

Brokers generally believe there will be fewer loans to go around this year, but most also predicted the change would be small enough that their own company would see little impact.

Surprisingly, almost a quarter of the brokers thought upcoming legislation would be good for their business. Some predicted that new restrictions would drive out industry neophytes who entered the market to take advantage of the 2003 refinance boom and that would cut competition.

Eighty-three percent of the brokers said they would spend some of their energy on refinancing activity, even though refinancing has dropped off. Of those, 30 percent said refinancing would consume at least half their business efforts.

More brokers said they plan to specialize in first-time home buyers rather than existing homeowners looking to trade up to a larger or more expensive home.

Technology issues were not listed in the top 10 concerns. Only 6 percent of respondents mentioned technological advances as having any type of impact on the market. The researchers wondered whether technology change wasn't mentioned because it "has become so much a part of our everyday lives that people take it for granted."

The survey did show automated valuations and appraisal products have gained momentum. About 18 percent of survey respondents said they use them.

One of Engle's top concerns—lender issues—ranked only 10th in the survey. Engle said she's busy working with her clients to find the right loan program for them, so she doesn't spend much time thinking about industrywide issues until they directly affect her clients.

"What's going on somewhere (else) doesn't necessarily affect my current customer, though it might affect the industry as a whole," Engle said.

Copyright: Inman News Features

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