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The Borrower, the Banker, and the Vote 

Unless you have been on safari in Africa or on some deserted island in the Pacific, completely out of touch, you have probably heard about the Great Mortgage Meltdown of 2007.  During the last six months borrowers with adjustable rate mortgages have been defaulting on their mortgages at an incredible rate, and more than 170 mortgage companies have gone out of business.  These changing circumstances have prompted lenders to tighten lending guidelines to avoid suffering the same fate as their competitors.  That old Bonnie Tyler song I Need a Hero keeps echoing in my mind.  Those of us in the home mortgage business may or may not need a hero, but those in the government seem to believe unwaveringly that they are our knights in shining armor.

In an impromptu speech on August 31, 2007, President Bush announced the FHASecure Initiative, a new HUD program designed to help adjustable rate mortgage borrowers refinance with a fixed rate FHA loan.  The FHASecure Loan Initiative, which was unveiled by HUD on September 4, 2007, allows borrowers to convert their adjustable rate mortgages to fixed rate loans, even if they are upside down on their homes or behind on their payments.  HUD has never moved so quickly!  The time between President Bush’s speech and the formal announcement by HUD was three business days.  From a historical perspective this is like breaking the light-speed barrier—impossible!

On September 10, 2007, Senator Charles Schumer (D-NY) introduced Senate Bill 2036 (1) to temporarily raise conforming loan limits, (2) to provide the necessary financing to curb foreclosures by facilitating the refinancing of at-risk subprime borrowers with safe prime loans and (3) to preserve liquidity in the mortgage lending markets.  The provisions of this bill would allow Fannie Mae and Freddie Mac (1) to lend an additional $145 billion over the next year, with 50 percent of that amount targeted towards borrowers with adjustable rate mortgages and (2) to lower the qualifying guidelines for these loans.

On September 12, 2007, the U. S. House of Representatives voted overwhelmingly to pass H. R. 1852, the Expanding American Homeownership Act of 2007.  The vote was 348 ayes, 72 nays, and 12 abstentions.  This bill, now being considered by the Senate Banking, Housing, and Urban Affairs Committee, is expected to be fast tracked and will both raise the FHA loan limits and revise the down payment requirements.

What does all this mean?  Why are Congress and the President acting so swiftly when normally you can put your son or daughter through college before Washington can get anything done?  Are they looking out for the borrowers who are in trouble and in need of help?  Are they bailing out their banker buddies?  Or are they just looking for votes in this politically charged election season?

Only time will tell.  Right now the Great Mortgage Meltdown is the IN thing in the news, making it a great stumping point for vote-hungry politicians who are campaigning for the 2008 election.

We don’t need the government to be our Hero—market forces will take care of the problem in due time.  My biggest fear is that government will continue to step in, overstepping its legitimate bounds (as it always does).  Most economists are projecting a mini-refinance boom over the next twelve months as mortgage companies rush to convert adjustable rate mortgages to fixed rate loans.  This should ease some of the pain the mortgage business is currently experiencing.  Hopefully, this generation of lenders has learned a valuable lesson.

John McClellan, who has more than fifteen years’ experience in real estate and mortgages, has been consistently ranked as one of the top ten mortgage brokers in Central Texas by the AUSTIN BUSINESS JOURNAL.  Involved on both the broker side and the banking side of mortgages, John handles hundreds of various types of transactions each year.  This experience gives John both a unique insight about the inner workings of the mortgage industry and the expertise to advise and counsel his clients about the best loans tailored to meet their individual needs.

John is associated with Supreme Lending, a full-service mortgage bank with corporate offices in Dallas and branch offices in Houston, San Antonio, Austin, and 24 other states.  Supreme Lending funds nearly a half billion dollars yearly in residential mortgage loans.

A native of Central Texas, where he resides today, John is married to the former Laura Mendleson, a native of Michigan and former Texas educator in the Round Rock Independent School District.  John and Laura have two children, Emma and Noah, and are involved in their church and their children’s school.

Anyone who has had the good fortune to spend time with John discussing mortgages and real estate can discern his passion and enthusiasm.  John’s commitment to his clients is legendary.  If you want a dedicated professional mortgage expert, you want John McClellan and his Team.