Origination News Feature Story

FL Tackles Its Challenges

By Lew Sichelman

LEW: Florida has a reputation around the country as being a real trouble spot. I was wondering what is going on in your respective markets? I've been hearing at the convention a lot of good, quality borrowers are being turned away because they can't get loans.

VALERIE: I am in the Jacksonville market. As far as our market goes, we didn't have such a dramatic decrease in property values as South Florida did. We also didn't feel the pain of the dramatic decrease in property values as quickly as South Florida did, which took quite a while to move up to our part of the state. But just like every other corner of Florida we have borrowers who can't refinance their loans because there is not enough equity there. Everybody is taking hits on their credit and because of the stricter underwriting criteria can't get loans. My market was probably one of the last to really feel the crunch.

CARL: I'm from South Florida. In addition to what Valerie was stating, real estate depreciation is a concern in South Florida but one of the major concerns is the mortgage insurance companies are not participating right now in the market and that has been a huge hindrance for us to lend. The only market right now that is in play is the FHA market. Fannie Mae has to start participating a little bit more with better products which would include the mortgage insurance companies to come in and become solvent. Hopefully the government could do something about that, relative to getting them back into insuring the products that are better needed in today's market.

RICHARD: I'm from central Florida. Our experience is like all other parts of Florida. There are pockets have not been hurt as much, but then there are areas like the Kissimmee/Poinciana area where there was a lot of speculation took place. A lot of homes were bought on speculative bets, to "flip" those properties to make a large gain. Once the bottom fell out as far as values were concerned, the ability for people to get rid of those properties no longer existed. So there are areas that have an abundance of foreclosures and short sales. The markets themselves from a price standpoint have begun to stabilize. We are seeing some activity as far as people putting purchase offers on to properties, in some cases multiple offers on those properties. There are some signs that it is turning, but as Carl indicated, product right now is scarce. In addition to Fannie Mae and Freddie Mac coming back in with the MI partners, we also need some private money to come back into the markets. We have a severe liquidity shortage still going on.

JON: I am from Brevard County and out of this group, it is probably the smallest county represented. We were probably one of the slowest ones to increase in value on the East Coast and I don't think we reached our potential as far as value-wise. But we've also come down the quickest because the service sector there couldn't afford the homes when they got priced high. What has happened now is that the values have come down where people can start buying. The homes in the $150,000 range and lower are starting to move. The hard part we are having with our consumers is they are making offers on these homes but there are no available comps because we're so long and skinny as far as our county that there are not enough comps that Fannie and Freddie require in terms of distance, in the same neighborhood or subject area.

TINA: Broward County has seen some of the areas such as Weston and those that are further west (in the county) that have actually stabilized and didn't have a large impact from the decrease in value. Those are doing refinances out of the ARMs and the other programs into the fixed rate. Obviously, just like everyone else said, the product mix is very limited; without the MIs, the lower loan-to-values is hurting as far as the refinances. There are still some major pockets in Broward County that are having the high foreclosure percentages but I will tell you we have seen some pick up in the market with the selling of those foreclosures and first-time homebuyers coming out of the woodwork.

LEW: Tell me what is going on in the state regarding the SAFE Act and what you are facing in Tallahassee?

VALERIE: Gov. Christ did sign the bill recently that implemented the minimum standards of SAFE into our lending law. We will go the very last possible deadline allowed by SAFE to become part of the National Mortgage Licensing System registry, which is Jan. 1, 2011. However, starting Jan. 1, 2010, we have some changes with regards to licensing. Currently unlicensed loan originators will all be transitioning into the new state loan originator license starting Oct. 1, 2010. The big thing for us still, and to work for the 2010 legislative session, is to make sure we have a public records exemption bill passed so our credit reports are not available for public record.

LEW: So under the law now, your credit reports will be available for any potential customer to peruse?

VALERIE: What they will be available for you fine folks from the press to be able to request copies of them and you'll be able to see them.

LEW: Just the media, nobody else?

VALERIE: Well whoever is allowed to request public records viewing.

LEW: What's wrong with that?

VALERIE: You have issues with identity theft and people viewing your account numbers. Let me ask you; would you want anyone to look at your credit history?

LEW: My credit records are an open book; just kidding. But are you concerned someone can interpret it wrong?

RICHARD: I believe it comes down to privacy. Personally, my credit report is of no concern to anyone else in this world. It does not affect me as far as my business is concerned. I understand what the mortgage industry is. I have been in it for 25 years. I understand what products are and how to qualify individuals for home purchase. I'm not out looking to put someone in a loan they can't afford to repay. It does no service to the borrower, it does no service to the economy, and it does no service for myself. How my personal credit has any impact on that, I fail to see why my credit should be public record.

VALERIE: We are allowing our credit reports to be pulled and viewed by the necessary parties that need to view them in order to allow us to be state-licensed loan originators. However, that does not mean that anybody should be able to view them. It should be your own personal choice. If I wish to show you my credit report, that is my decision. It should not be the legislature's decision to allow my personally information to be viewed by anyone. If I do something knowing that document is going to be recorded in the public record, I do so willingly. But I do not willingly allow someone to look at my personal information unless I am going to lay it on the table and show it to them.

LEW: Are there any other professionals in the state that are required to do what you are required to do?

VALERIE: There are insurance agents, securities brokers, that do have credit reports pulled as part of licensing. However, they have a public records exemption.

LEW: So you're just asking for the same?

VALERIE: Exactly.

RICHARD: (Regarding the SAFE Act) There is a lot of misinformation out there right now. We're trying to get the word out to, not only the public, but also the industry as far as what is going to take place. There are multiple dates as far as implementation is concerned that a lot of people are still confused over. So we're trying as an association to get the word out that these individuals who had not been required to be licensed previously, who had worked for a mortgage lender or a correspondent lender in the state of Florida, those individual originators have to be licensed by Jan. 1, 2010 to originate a loan. No exceptions. We are trying to promote that. Late 2010, all us are going to have to go through 20 hours of education as far as NMLS is concerned. It is critical that people understand that if they want to continue on this business they need to take action to get this license. And the credit report is part of that licensure come 2010.

LEW: The credit report is a state issue, not part of the SAFE Act?

RICHARD: There are credit requirements as far as the SAFE Act is concerned. It is up to the states as to how they interpret the individual's credit report as far as licensure is concerned. It is also up to state as far as making the credit report not public information.

VALERIE: Just to clarify one thing. What SAFE says is you have to show financial fitness, character and responsibility. And the way to do that is to pull an individual credit report. Yes it is true the states can put in their lending laws how the feel they will view those reports and the criteria that they are going to use, but ultimately it is HUD who will approve whether or not the credit criteria established by each individual state is sufficient.

LEW: Are you having some of the same issues reported by other originators regarding appraisals?

RICHARD: There are so many pressures on the markets as far as foreclosures, short sales, the implementation of HVCC. All of those ... have [put] pressure as far [on] values. ... It is difficult at best when you are trying to make an appraisal and all of the properties you are dealing with are either foreclosures or short sales to establish what is a value. About six months ago, I saw an appraisal with six comps on it. Every single one of them was a short sale. As Jon mentioned, in some of the smaller markets, you have got communities that are extremely impacted by ... foreclosures