MANY GOOD OPTIONS REMAIN FOR REAL ESTATE BORROWERS

There is no question that the turmoil in the financial markets brought on by sub-prime lending created difficulties in finding good borrowing solutions for those who wish to buy a home or want to re-finance their existing mortgages.

It is important to understand however, that sub-prime lending is only a small portion of the entire real estate market. Many homeowners own their homes free and clear of any mortgage debt. Many others have financed their homes through lenders that sell mortgages through the government sponsored entities such as Freddie Mac, Fannie Mae, FHA and VA. These borrowing entities, plus bank portfolio lenders, remain great sources of financing for most home owners. In fact, many financing options have only improved over the past several weeks as mortgage rates have declined. In fact, today there are many opportunities to obtain a lower interest rate than a year ago.

By definition, a bank portfolio lender does not sell its loans to outside investors, but keeps them on their own balance sheet. As a result, portfolio lenders can be more flexible, since the loans do not have to conform to someone else’s standards, and they can therefore offer added opportunities for borrowers. Because government sponsored lenders have narrower lending guidelines, bank portfolio lenders often have greater flexibility to meet the specific needs of individual borrowers. This difference can be very meaningful to borrowers and should be actively explored, particularly in light of the fact that the current real estate market is clearly a “buyer’s market” for those individuals who can obtain mortgage financing. In this challenging lending environment, the local bank down the street that makes portfolio loans may in fact be your best resource.

In addition, first-time buyer programs remain available to borrowers. These programs allow customers to finance 95 percent or greater of the value of the home’s purchase price. Some home buyers may qualify for other programs through city and county subsidies that assist buyers in our local markets. Programs like these, combined with today’s current low mortgage interest rates, create strong purchasing power for potential home buyers. Other good news is that a lower home price also lowers property taxes on new purchases. All of these factors should create real optimism for home buyers and should encourage individuals to explore all of their options.

For existing home owners, many financing options remain for those people who maintain 20 percent or more equity in their homes. Today’s rate environment offers historically favorable interest rates. Again, your local community bank, such as Tri Counties Bank, is a great resource to evaluate your ability to re-finance and identify financing solutions that may lower your monthly payments or more quickly reduce the amount you owe on your home. It is a good time to meet with your banker and review the financing options available to you.

For people who are having difficulty meeting their current obligations, a trip to the bank may be even more important. Often people avoid problems rather than to seek help and advice. Believe it or not, your local bank is the last entity that wants to foreclose on your house. Banks in general will make every reasonable effort to find financing solutions before entering foreclosure proceedings. That’s why it is always a good idea to be proactive and communicate your problems and concerns directly to your banker. Together, the borrower and the lender may find workable solutions and avoid negative financial consequences. It is much easier to have this kind of dialogue with a portfolio lender who can make a decision tailored to the needs of an individual borrower, and this is a key advantage of dealing with a community bank rather than large, national lenders.

Regardless of your circumstances, today’s residential real estate financial market offers many good options for borrowers. Don’t let today’s sub-prime headlines interfere with obtaining good financing solutions in today’s favorable mortgage market. Be proactive and seek out solutions—whether you want to buy your first home, lower your interest rate, or avoid credit problems. At Tri Counties Bank, we would be happy to help you chart your own course through these challenging times.

Sincerely,

Richard P. Smith
President and Chief Executive Officer