Home Archives September 2007 What Oregon can expect from the mortgage fallout

What Oregon can expect from the mortgage fallout

| Print |  Email
Saturday, September 01, 2007

THE CURRENT STATE of the mortgage industry should be of great concern, as it affects the core of the American Dream: home ownership.

In response to a perceived need to qualify new homeowners in the face of rising prices, Fannie Mae developed a series of adjustable rate mortgages to allow lower down payment requirements and lower “teaser” interest rates, which would increase as home appreciation occurred.  With that and the current view of the industry, Oregonians can expect to see three possible outcomes:

Less disposable income: While first-time buyers have  benefited from lower rates, a rate increase of 1% represents $6.8 billion in annual debt service. Although this is less than 1% of GDP, it competes for disposable income and falls on those households with higher household debt, less certain income and net savings. We can expect a combination of higher defaults from households with less equity and a reduction of consumer spending from those with more.

Tighter mortgage funding: I believe this to be the biggest concern. Funding of new mortgages is dependent upon the attractiveness of mortgage-backed securities to institutional investors. Also, 18% of subprime debt is held by foreign investors, whose larger concern may actually be the declining dollar.

Regulation: Although there is a real need for consistent regulatory standards, only 45% of mortgages are originated by a regulated financial institution. The federal Office of Thrift Supervision recently issued regulatory guidance over underwriting standards, which I urge all regulatory agencies to use.

Home ownership is an important public policy and should be protected and enhanced. The current situation, while not a crisis, is unique in history and bears watching.

Michael V. Paul
President and CEO
The Commerce Bank of Oregon, Portland


Have an opinion? E-mail This e-mail address is being protected from spambots. You need JavaScript enabled to view it

 

More Articles

Gone Fishing

October 2014
Thursday, September 25, 2014
BY LORI TOBIAS

Business has been good to Laura Anderson, leading some to suggest she must be awfully lucky to find such success in a business notorious for failure. But luck’s had little to do with it.


Read more...

Powerlist: Colleges and Universities

September 2014
Wednesday, August 27, 2014
BY KIM MOORE

A conversation about higher education with the presidents of the University of Oregon and Clackamas Community College, followed by September's powerlist.


Read more...

Knight Vision

October 2014
Thursday, September 25, 2014
BY VIVIAN MCINERNY

Travis Knight wants to release a movie a year. Can he pull it off?


Read more...

Launch

September 2014
Tuesday, August 26, 2014
BY JESSICA RIDGWAY

September's Launch article features Orchid Health, BuddyUp and Inter-Europe Consulting.


Read more...

Video: The 100 Best Survey

News
Thursday, August 28, 2014

100-best-logo-2015 500pxw-1OB Research Editor Kim Moore shares some pointers about the 100 Best Companies to Work For survey.


Read more...

Tight and Loose

September 2014
Wednesday, August 27, 2014
BY JENNIFER MARGULIS

As schools implement more rigorous academic standards, holistic and flexible approaches to K-12 education flourish.


Read more...

The Rail Baron

October 2014
Thursday, September 25, 2014
BY LINDA BAKER

Oil is gushing out of the U.S. and Canada, and much of it is coming from places that don’t have pipeline infrastructure. So it’s being shipped by rail.


Read more...
Oregon Business magazinetitle-sponsored-links-02
SPONSORED LINKS