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Continued from Page 1 we’ve had such a dramatic drop in rates in such a short time.”

At Regions Financial Corp., a Birmingham, Ala., regional bank, refinancing business is up between 40 percent and 45 percent since October. “This market will be very dif- ferent than previous markets, and that’s a function of the credit constraints and the jumbo-rate issues,” says Todd Chamberlain, Regions’ head of mortgage banking.

Ron Hermance is more blunt. The chairman and CEO of New Jersey’s Hudson City Bancorp Inc. (Nasdaq: HBCK) says many consumers “will be left out in the cold this time because underwriting is back in vogue,” and many homeown- ers will find that during the previous housing boom “they originally got credit they weren’t entitled to.” In the first two weeks of this year, refinancings accounted for 56 percent of Hudson City’s mortgage volume, compared with 42 percent for all of last year.

Overall, the Mortgage Bankers Association reports that for the week ended Jan. 11, weekly mortgage applica- tions surged to a level not seen since spring 2004. Refinancings accounted for nearly two-thirds of the application volume, the group says. Still, those are just applications, and many are being rejected these days as lenders adopt tighter

standards. For jumbo


though, higher standards aren’t the biggest problem: Rates on those loans averaged 6.8 percent at the end of last week, according to HSH, meaning the spread between conventional and jumbo rates is nearly a full percentage point — four times the typical gap.

Jumbo rates, lenders say, aren’t coming down alongside conventional rates because


Banking & Finance


buyers of those mortgages in the secondary market remain skittish. As such, today’s jumbo rates are well above the existing rates many home- owners currently have on their mortgage, meaning “there’s no reason to refinance,” says Jay Steren, CEO at Mortgage Capital Associates, a Los Angeles mortgage banker.

In the conventional-mort- gage market, Fannie Mae and Freddie Mac are moving to risk-based pricing, which has the effect of tightening lend- ing standards across the coun- try. The upshot: Homeowners with weak credit scores or lit- tle equity in their home will pay for the risk associated with underwriting their mort- gage through higher interest rates and added fees — which has the effect of dimming, if not eliminating, the benefits of refinancing.

To get the best rates under the new risk-based guidelines, homeowners “need a credit score over 679, or equity of greater than 30 percent,” says



Menatian. But as home prices fall in many markets, home- owners’ equity sinks alongside it — making it tough to get more-attractive rates.

The risk-based guidelines impose so-called delivery fees that range between 0.75 per- cent and 2 percent of the mortgage value for consumers with credit scores below 680. The highest fees are charged to those with credit scores below 620.

Menatian says buyers with credit scores in the 620 - 639 range, and who have less than 30 percent equity, are getting mortgage rates these days of about 6.375 percent, while the best borrowers are getting 5.75 percent.

Holders of jumbo mort- gages, meanwhile, are run- ning into other problems. Rodney Rideout, of Darien, Conn., has an adjustable-rate mortgage of about $500,000 scheduled to reset in March, meaning his interest rate will

rise to more than 6 percent. That will bump up his month- ly payments by about $460. He wants to refinance, but because of the jumbo market, he’s unable to find an afford- able fixed-rate mortgage.

“Everything is up near 7 percent, so it makes no sense,” says Rideout. “I was thinking ‘jumbo’ meant something up near $1 million; I didn’t think it would apply to my loan.”

Indeed, the definition of jumbo could actually be changing soon. For months, Congress has been debating the idea of raising the limit on jumbo mortgages, possibly to $600,000 or more. If so, that would allow a larger number of borrowers to refinance at

lower rates. But just what will happen, and when, remains uncertain.

In the meantime, rates on jumbo mortgages can vary significantly. While the aver- age jumbo rate is about 6.8 percent, Hudson City Bancorp

  • which operates in New

Jersey, New

York and

Connecticut —

is offering

jumbo mortgages at 6.25 per- cent, for example.

“You need to do some leg- work, scour the market, to find the best rates,” says Keith Gumbinger, vice president of HSH. He suggests starting with lenders who often keep on their books the mortgages

they underwrite,


as local





unions. “They can easily be a half-percent lower than the averages,” he says.

All of this is affecting the home-buying market, partic- ularly for expensive homes. Buyers are increasingly aware of the high jumbo-mortgage rates and the impact on their monthly payment. Thus, sell- ers these days are adjusting their sales price or offering other incentives in order to trim a buyer’s mortgage below the jumbo limit.

Neil Saunders, president of Greenwich Mortgage Corp. in Providence, R.I., is selling a 4,400-square-foot house in East Greenwich, R.I., priced at $998,000. To entice buy- ers, he’s willing to offer an

interest-free loan for a year or two on the cash needed above the $417,000 cutoff. Saunders expects Congress will raise the ceiling on jumbo mort- gages and the buyer will then be able to refinance into a

lower-rate, mortgage.


Other sellers, says Ron Phipps, president of Phipps Realty and Relocation in Warwick, R.I., are buying down the interest rate for buyers, often for just a year or two, to make it more compa- rable to a conventional rate.

“Everyone is very sensitive to this situation right now,” Phipps says. “This is still a correcting market.”

Source Code: 20080124crj

Retailers sink into the doldrums


The Wall Street Journal

The retail industry appears to be skidding toward its first big wreck in 17 years.

Chains are slamming the brakes on store openings, cut- ting back on inventory and girding for leaner times as consumer spending chills. The speed with which sales slowed during the holidays caught even cautious retailers off-guard, prompting a flurry of profit warnings.

And while data on December consumer spending won’t be released until the end of the month, plummeting sales sug- gest consumers are snapping shut their pocketbooks.

“The consumer is very cau- tious,” says Trudy Sullivan, chief executive officer at cloth- ing retailer Talbots Inc. (NYSE: TLB), which will pare store inventories by 7 percent to 8 percent this year and use more frequent markdowns. Retailers haven’t faced so many difficulties since the deep economic downturn of 1990-1991 pushed many off track.

An expected 4 percent sales increase for the November- December holiday period at

stores open at least a year rang in at only 3 percent compared with the 2006 holidays, according to trade group National Retail Federation — the smallest increase since 2002. Even then, sales were propped up by inflation-boost- ed prices of food, fuel and drugs. Apparel, jewelry and home-products chains report- ed same-store sales declines.

It will be a discouraging first half of the year, economists warn. “It will feel like a reces- sion to many people even if we technically avoid one,” says Frank Badillo, senior econo- mist at market researcher TNS Retail Forward. “Financial stress from high energy costs, the fallout from the housing slump and slug- gish employment and income growth” will weigh on shop- pers, projects Rosalind Wells, chief economist of the National Retail Federation.

It’s too early to judge how deep or prolonged the slow- down may be. Badillo and other experts forecast weak gains in retail sales, but some investors see a deep retail recession. Wall Street senti- ment is at the lowest level in decades, measured by price-

to-earnings ratios, the price of a stock divided by its earnings per share. The forward price- to-earnings ratios of afford- able-luxury goods maker Coach Inc. (NYSE: COH) and department-store chain Kohl’s Corp. (NYSE: KSS) recently touched historic lows, and dis- count department-store chain Target Corp. (NYSE: TGT) is near a 12-year low.

In hopes of averting a reces- sion, Democrats and Republicans in Washington have called for tax rebates and interest-rate cuts to stimulate the economy. Such measures helped contain the recession of 2001, which lasted just eight months, less than half the usual duration of modern recessions.

Complicating the retail out- look is a decade of new and intense competition. The number of retail chains and sales outlets is dramatically larger now than in 1991. The Internet, which has changed how customers price and buy goods, didn’t even exist as a place to do business.

How would a recession change the industry today? A look back suggests that low- cost approaches survive best, while companies that are

financially weak or loaded with debt could be forced to restructure. From late 1989 — when holiday sales first slowed — through April 1991, at least 50 major retailers rep- resenting $23.7 billion in annual sales sought bankrupt- cy-court protection.

That recession weakened regional and even some national chains, setting the stage for the explosion of big- box and discount retailers in the following years. The reces- sion helped Best Buy Co. (NYSE: BBY), Home Depot Inc. (NYSE: HD), Target and Wal-Mart Stores Inc. (NYSE: WMT) take off as weaker companies struggled.

Even the milder 2001 reces- sion, which was largely due to a decline in business investment after turn-of-the-century Y2K and dot-com capital-spending booms, presaged the later con- solidation of department-store chains. In 2005, Macy’s corpo- rate parent acquired May Department Stores Co., becoming Macy’s Inc. (NYSE: M), and Kmart completed its purchase of Sears, Roebuck & Co. to form Sears Holdings Corp. (Nasdaq: SHLD).

Source Code: 20080124crm

San Diego housing inventories provide opportunities for buyers

With real estate invento- r i e s i n c r e a s i n g a n d m o r t - g a g e r a t e s a t n e a r - h i s t o r i c l o w s , S a n D i e g o h a s b e c o m e a b u y e r s m a r k e t f o r m a n y . A n d f o r t h o s e c o n s i d e r i n g t a k i n g t h e s t e p s t o w a r d h o m e o w n e r s h i p , o r w a n t i n g t o h e l p t h e i r k i d s g e t i n t o t h e i r f i r s t h o m e , t h i s c o u l d b e t h e o p p o r t u n e t i m e t o g r a b h o l d o f a t r u e b a r g a i n . A c c o r d i n g t o r e c e n t s t a t i s - f r o m DataQuick tics



t h e m e d i a n h o m e p r i c e i n S a n D i e g o d r o p p e d 2 . 3 p e r - D e c e m b e r down cent in $425,000 to from ,

$435,000 in November. A d d i t i o n a l l y , a t o t a l o f o n l y 1 3 , 2 4 0 n e w a n d r e s a l e h o u s - es and condos were sold in the Southern California dur- i n g D e c e m b e r . W h i l e t h e s e n u m b e r s a r e u p 0 . 5 p e r c e n t f r o m 1 3 , 1 7 3 f o r t h e p r e v i o u s m o n t h , t h e y a r e d o w n 4 5 . 3 p e r c e n t f r o m 2 4 , 2 0 9 f o r D e c e m b e r o f l a s t y e a r . T h e s e n u m b e r s t r a n s l a t e to bargains for buyers,” said A r t M e t r a s , a c t i n g v i c e p r e s i - d e n t o f l e n d i n g a t California Coast Credit U n i o n . R i g h t n o w , i n v e n t o - r y i s h i g h a n d t h e r e a r e d e a l s t o b e h a d i n m a n y p a r t s o f S a n D i e g o C o u n t y . B u t , a c c o r d i n g t o M e t r a s , b u y e r s n e e d t o c a r e f u l l y c o n - s i d e r t h e i r l o a n o p t i o n s b e f o r e t a k i n g t h e p l u n g e . C o n s u m e r s w i t h g o o d c r e d i t h a v e a v a r i e t y o f l o a n c h o i c - e s a v a i l a b l e t o d a y , M e t r a s s a i d . T h e r e a r e l o a n s , s u c h as our new Freedom Home Loan, which offer consumers real incentive.”

California Coast Credit Union’s Freedom Loan is a u n i q u e p r o d u c t d e s i g n e d w i t h n o p o i n t s , f e e s o r c l o s - i n g c o s t s . T h i s l o a n i s a g r e a t o p t i o n f o r t h e f i r s t - t i m e h o m e b u y e r t o c o n s i d e r , M e t r a s s a i d . “We designed a loan option

that can save our members a significant amount of money from the start and protect them from rate increases down the road.”

F o r t h o s e w a n t i n g t o r e f i - n a n c e o u t o f t h e i r a d j u s t a b l e j u m b o l o a n s , t h e n e w s i s a l s o e n c o u r a g i n g . Q u a l i f i e d b o r r o w e r s c a n g e t a n o c l o s i n g c o s t j u m b o l o a n a t a r a t e c u r r e n t r a t e o f j u s t 6 p e r c e n t A P R o n a 3 0 - y e a r f i x e d , w i t h c o n f o r m i n g l o a n s w e i g h i n g i n a s l o w a s 5 . 7 5 p e r c e n t , M e t r a s s a i d . T h i s l o a n o p t i o n i s i m p o r - t a n t t o t h o s e w h o h a v e a n a d j u s t a b l e l o a n t h a t c o n t i n - u e s t o i n c r e a s e a n d f o r t h o s e m a k i n g a p u r c h a s e a n d w a n t t o b e p r o t e c t e d f r o m i n t e r e s t r a t e f l u c t u a t i o n s .

Home loan choices can be o v e r w h e l m i n g f o r m a n y c o n - s u m e r s , s o e d u c a t i o n a n d research is essential. “Current and first-time home- owners alike should be a w a r e o f t h e o p t i o n s a n d o p p o r t u n i t i e s c u r r e n t l y a v a i l - a b l e , s a i d M e t r a s . T h e r e a r e m a n y c h o i c e s a v a i l a b l e t o d a y , s o m a k e a n a p p o i n t - m e n t w i t h a l o a n o f f i c e r a n d discuss the best option for y o u r s i t u a t i o n . T h e s t e a d y g r o w t h o f C a l i f o r n i a C o a s t C r e d i t U n i o n o v e r t h e y e a r s i s d u e , i n l a r g e p a r t , t o o f f e r i n g a w i d e s e l e c t i o n o f i n n o v a t i v e p r o d u c t s a n d s e r v i c e s a n d f o r p a s s i n g a l o n g s i g n i f i c a n t c o s t s a v i n g s t o m e m b e r s , s o m e t h i n g c r e d i t u n i o n s a r e k n o w n f o r .

“Consumers expect their financial institution to watch out for their best interests, as well as guide them on a path to financial success,” said Metras. “We are dedicated to both.”

For more information on California Coast Credit Union home loans, call (877) 4 LOW LOANS, or visit www.calcoastcu.org.

Submitted by California Coast Credit Union

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