by Bill James, CMC
Residential Bancorp
Canton, Ohio

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January 2008

FEBRUARY 2008

POTPOURRI by W H James, Jr., CMC, Board Chairman-Residential Bancorp, Canton, Ohio,  January 9, 2008.

Has there ever been a time when an industry has faced greater turmoil and threat? The short answer is yes, but we’ll talk about that later. The politicians are now having a feeding frenzy on the mortgage industry and we certainly made it easy for them to jump in and start dismembering our business. As talked about previously some of the new rules coming from Congress are purely wacky. Without considering the fact that people often have circumstances of the most unusual nature that create a hidden benefit to their reason for borrowing, Congress now proposes that lenders must assure that any mortgage granted provide a PROVEN TANGIBLE BENEFIT to that borrower . . . . this just isn’t realistic in many cases. What if Dr’s had this requirement hanging over their heads on each and every case, and face draconian penalties if proven wrong? Many needy patients would go untreated. So also will it now be with the borrowing public. As is often the case, when politicians act while shooting from the hip, innocent people get shot.

OK, let’s talk about challenges. We have them in spades today, no denying. Do any of you remember a day back in the 60’s when Mortgage Bankers (there were no Mortgage Brokers) woke up to discover we could no longer close conventional mortgage loans with interest rates exceeding 6%? Rates at the time were around 6 ½ %. The Ohio Senate revived a law that they construed to set an absolute max of 6% on any mortgage closed by any lender that did not operate under a Federal charter or was under some type of Federal  authority such as insurance of accounts. In those days mortgage loans were available from: Savings and Loans, Commercial Banks, Insurance companies, and Mortgage Bankers. This put Mortgage Bankers in the sewer! We could continue to close FHA and VA loans because back then the max interest rates you could charge on these mortgages were set by HUD/Congress. Needless to say the S&L’s and Commercial Banks had no quarrel with the implementation of this law. The Mortgage Bankers converged on Columbus like locusts and met total rebuff. The only quick answer we could come up with was a band aid fix. We determined that if we could get an arrangement with a S&L willing to allow us to close loans in THEIR name with us funding the loan’ it would pass muster. The problems? Your warehouse lender had to ok the risk you were taking in funding a loan you legally did not own until the S&L assigned the loan to you . . . you then had to pay the S&L a fee for their “services”. At least it put us back in business until we got the politicians out of na na land. Bet few of you remember in this same period in time “Ohio’s Blue Laws”. . . . NO BUSINESS DEALING WITH THE PUBLIC COULD BE OPEN ON SUNDAY’S. Some even construed it to include Realtors open houses!

I’ve been watching the primaries and the new “buzz word” is CHANGE, and most of them couldn’t figure how to give it on a dollar!

Everyone is tiptoeing around the “R” word . . . well anyone that doesn’t see that we are moving into a recessionary period just “ain’t paying attention “. .  .A few months ago as I was writing the column, I heard CNN announce the stock market had just set a historical new record, over 14000 Dow . . . . I had a flashback to Greenspan’s iteration and description of the then red hot market in the late 90’s. His two word description of the stock market “IRRATIONAL EXUBERANCE” will forever stick in my mind. It seemed we were now exactly duplicating those same conditions. Potpourri wondered in that column, if maybe we should look for a “quick 1,000 point drop followed by further declines”. As I write this column on January 9^th 2008, the Market lost those quick 1000 points and has continued down to the 12600 point level. Could this be a good thing? What if we had had a similar correction in late 1999, would that have negated the collapse of 2000? Who knows. . . . I keep seeing good possibilities for our industry. Real estate is nowhere near collapse, there are many sections of America that have stable to increasing real estate values . . . The areas in disaster mode are those that realized YEARS of INSANE Real estate value APPRECIATION and endless greed. I just read that of the 5 least expensive cities in America, Canton, Ohio was #4. Values of existing homes in Ohio have not collapsed, there has been a slow down in value appreciation and some markets have hit 0 appreciation but these same markets had unusually High appreciation over the last 6 to 7 years. THE 5 WORST PEAK TO TROUGH REAL ESTATE VALUE DROPS WERE ALL IN CALIFORNIA AND FLORIDA!!! There is every indication that we have a 10 month overhang in existing housing in the US, and every reason to believe we will return to a sane and normal real estate industry in less than 1 year, mortgage interest rates should remain attractive, the US economy should be coming back from a minor recession, the number of mortgage loan sources will be much more in line with demand, and we will be back to sanity in lending. Lots of changes coming, it’s going to be OK . . . .

I’m thankful the good lord did not make me a gambler. I would most certainly have bet my entire nursing home savings on the “BUCS” last Monday. I truly believed OSU would take the measure of LSU. My first cold chill came with Wells going 65 for a TD and then a quick field goal . . . . Shades of the Florida game! Jim Tressel is in my mind still the finest coach and leader of young men in America . . . .

No I’m not ready to anoint the Browns as a real NFL contender yet . . . . They sure played well in spurts. They were definitely “schedule blessed” and 2008 will be the litmus test. Anderson has NFL QB possibilities and has guts in abundance . . . . We’ll see.

Finally I want to compliment a few people. When you sit on a Board of Directors, you are sworn to appropriate silence as to events and discussions of the Board. I’m going to bend that rule a bit . . . . OAMB President Kevin Patterson and the Exec Committee/Board are performing in an exemplary manner on your behalf. The hours they are and have been spending on behalf of the OAMB and more importantly the Mortgage Broker Industry in Ohio is above and beyond. The fact of the matter is you will never hear about much that is accomplished on your behalf! Your Exec Director Mary Ellen Addessi is maintaining a fully functioning state office without skipping a beat under some very demanding circumstances. You as OAMB members are being well led, membership renewal time is at hand . . . . . spread the word and in 2008 let’s get the best Mortgage Broker membership representation we have ever had! 

Bill James is Board Chairman of Residential Bancorp in Canton, Ohio and can be reached @ 330-495-6041.