Thursday, April 26, 2018
Business

The Nation's Housing: Bank windows open a bit wider

Banks open loan windows a bit wider

WASHINGTON — Banking and credit analysts say the dollar volumes of new originations of home equity loans are rising again — significantly in areas of the country that are seeing rebounds in property values.

Not only have owners' equity positions grown substantially on a national basis since 2011 — up by an estimated $1.7 trillion during the past 18 months, according to the Federal Reserve — but banks increasingly are willing to allow owners to tap that equity. But unlike during the credit bubble years of 2003-06, they aren't permitting owners to go whole hog — mortgaging their homes up to 100 percent of market value with first, second and even third loans or credit lines.

Now major lenders are restricting the combined total of first and second loans against a house to no more than 85 percent of value. For instance, if your house is worth $500,000 and the balance on your first mortgage is $375,000, you'd likely be limited to a second mortgage or credit line of $50,000. Contrast this with 2007, the high-point year of home equity lending, when many lenders offered so called "piggyback" financing packages that allowed 100 percent debt without private mortgage insurance. A buyer of a $500,000 house could get a $400,000 first mortgage and a second loan of $100,000.

That ultimately didn't work well for the banks. During the third quarter of 2012 alone, according to federal estimates, banks wrote off $4.5 billion in defaulted equity loans, often in situations where homeowners found themselves underwater and behind on both first and second loans. In such a situation, second mortgages become essentially worthless to the bank since in a foreclosure, the holder of the first mortgage gets paid off first. The second loan holder is left holding the bag.

Lenders are also pickier on credit quality than they were as little as six years ago. If you've got a delinquency-pocked credit history, and you want to pull out a substantial amount of equity using a credit line, don't count on getting the best rates.

Say you own a house worth $600,000 in Los Angeles with a $400,000 first mortgage balance, and you want a $100,000 equity credit line. Wells Fargo's online equity loan calculator quoted a floating-rate "home equity account" for 10 years at 4.75 percent in mid-April for borrowers with "excellent" credit. The site defines excellent as essentially meaning no missed payments and no delinquencies on your credit report. For a borrower with "average" credit seeking the same $100,000 credit line, by contrast, the rate jumps to 7.5 percent. The term "average" means you've got a credit history with delinquencies and perhaps other problems.

Matt Potere, Bank of America's home equity product executive, said that his institution has no specific cutoffs for FICO credit scores, preferring instead to look at multiple factors simultaneously — combined loan to value, full credit history and the location of the property. Location factors into pricing, Potere said, because some markets have historical patterns of high volatility — prices spiral upward for a while, then plummet. This raises the potential costs to the bank if a borrower goes delinquent when values are in decline. Some jurisdictions also have special add-on costs that factor into quotes, such as mortgage taxes, and these can raise pricing quotes slightly.

Despite the multibillion-­dollar losses that large lenders have racked up on their equity loan portfolios from the bust and recession period, executives such as Potere are convinced that this time around, things will be different thanks to smarter underwriting.

Comments
Cities turn to private inspectors as construction booms, and problems follow

Cities turn to private inspectors as construction booms, and problems follow

ST. PETERSBURG --- With construction booming throughout Florida, private inspectors are increasingly reviewing the work of building contractors. But that has sometimes led to missed code violations and other problems.Now the city of St. Petersburg is...
Updated: 3 hours ago
Almost half of all homes for sale in Tampa Bay are unaffordable for first-time buyers

Almost half of all homes for sale in Tampa Bay are unaffordable for first-time buyers

Times Staff WriterAlmost half of all homes on the market in the Tampa Bay area are unaffordable for many buyers. According to Zillow, 48.7 percent of homes for sale are "high-end --- more than $348,0000 in Tampa Bay -- while just 20.5 percent are "l...
Updated: 4 hours ago
Outback Steakhouse owner Bloomin’ Brands beats Wall Street forecast in first quarter

Outback Steakhouse owner Bloomin’ Brands beats Wall Street forecast in first quarter

TAMPA — Growing sales at Outback Steakhouse have once again led parent company Bloomin’ Brands to beat Wall Street’s expectations, the latest quarterly report shows.But the Tampa-based restaurant group’s other chains are failing to keep up. Bloomin’ ...
Updated: 5 hours ago
Focus crossover and Mustang will be only Ford sedans sold in North American dealerships

Focus crossover and Mustang will be only Ford sedans sold in North American dealerships

DEARBORN, Mich. — Ford Motor Co. said Wednesday it will shed most of its North American car lineup as part of broad plan to save money and make the company more competitive in a fast-changing marketplace.The changes include getting rid of all cars in...
Updated: 5 hours ago
Domino’s lifts curtain on ‘pizza theater’ in Lutz

Domino’s lifts curtain on ‘pizza theater’ in Lutz

LUTZ — Domino’s new ‘pizza theater’ store recently opened in Lutz, just outside of the Ballantrae subdivision. The store features the open-concept pizza theater design which offers viewing of the food preparation process.There is also a comfortable l...
Updated: 6 hours ago
Engaged couple opens chiropractic practice for all ages on W Hillsborough Ave

Engaged couple opens chiropractic practice for all ages on W Hillsborough Ave

TAMPA — Dr. Kaylee Canalungo and Dr. Kace Groff were attending Palmer College of Chiropractic in different states when a mutual friend introduced them. After graduating and working together at a chiropractic office in New York, they are engaged to be...
Updated: 6 hours ago

Clean Juice gets 3rd spot in Hyde Park Village

Michelle Piniella forecast about another South Tampa Clean Juice location in March, and now it’s official. The healthy, fresh juice concept has secured a lease with Hyde Park Village.The opening date is to be announced this summer as it is currently ...
Updated: 6 hours ago
Cuban cuisine transformed at Armature Works

Cuban cuisine transformed at Armature Works

DOWNTOWN — Felicia Lacalle says cuban cooking is in her blood as she traditionally learned from her mother growing up. Since then she has perfected her craft finding ways to recreate classic dishes with a modern twist and now she aims to change the C...
Updated: 6 hours ago
Who books 4,600 hotel nights in Hillsborough? TV commercial crews, and they keep on coming

Who books 4,600 hotel nights in Hillsborough? TV commercial crews, and they keep on coming

TAMPA — Hillsborough County interim film commissioner Tyler Martinolich has a unique approach to channel surfing. He searches for two kinds of commercials: those made in his county and those he thinks should have been."Television commercials mean mon...
Updated: 3 hours ago
Why does Yelp think Asian restaurants serve cat and dog meat?

Why does Yelp think Asian restaurants serve cat and dog meat?

A strange thing happened when typing "dog menu" into the restaurant ratings website and app Yelp. It automatically generated suggested searches. There were dog massage, hot dogs, pet groomers. Also: "dog meat." But it got more disturbing. Take Yelp...
Updated: 8 hours ago