Subprime and the Mortgage Market Will Return: Mortgage Bankers Chief

The mortgage market is still weak and the subprime market remains non-existent, but both will come back as recent headlines about foreclosures have ignored some of the resolutions of market problems, Kieran P. Quinn, chairman of the Mortgage Bankers Association said last week at the Federal Reserve Bank of Chicago ’s Annual Conference on Bank Structure and Competition.

“Subprime will be back. We have to have a way for [home ownership] to be available to more than just the wealthy,” Quinn said, though he made no prediction when the subprime market would pick up again.

However, Quinn called for regulators to be more active in order to avoid the problems of the past couple of years – overextended credit, unqualified buyers and questionable lending tactics. “We need FHA modernization. We also need a single regulator to stay on top of GSEs (government sponsored enterprises),” Quinn said. “We want to see licensing of mortgage brokers.” GSE’s includes such organizations as Freddie Mac and Fannie Mae.

Quinn added that locally issued tax exempt bonds could provide funding to help currently distressed borrowers in danger of losing their homes. However, he added that the number of foreclosures would be much higher if lenders weren’t working aggressively with borrowers.

Of the 430,000 adjustable rate mortgages readjusted in the last year with terms of 2-28 (two years fixed teaser rate, and 28 years at adjustable market rates) or 3-27, only 553 went into foreclosure, according to Quinn. About 230,000 were refinanced and thousands of others were modified with more favorable terms. Yet these deals were overlooked in the general press.