Florida Mortgage Lenders See Revenues, Stock Prices Fall Amidst Slowing Market
It’s not just home builders that are seeing their revenues and stock prices crumble in the midst of the weakening real estate market. There’s also the major Florida mortgage lenders who provide the cash to finance the houses. With demand down across the board, their revenues are sinking fast from a year ago.
Some are down as much as 20.9 percent off their May highs. Conventional and subprime lenders, which cater to borrowers with less-than-stellar credit scores, are both down sharply. Accredited Home Lenders, for example, has lost nearly half of its value, while Thornburg Mortgage, specializing in adjustable-rate mortgages, has shed nearly 20 percent.
The market for both conventional and subprime home loans has grown gloomy amid growing signs that the five-year housing boom is over. Squeezed by high prices and more expensive borrowing costs, sales of both new and existing homes fell more than 4 percent in July, the National Association of Realtors says.
The inventory of unsold homes is also rising, and fewer people are taking out home mortgages in Florida and beyond. Overall applications are down 25 percent compared to the same period a year ago, according to the Mortgage Bankers Association.
“The volume of loans is declining. The market expects declines for the next few years. And that is obviously a drag on revenue and earnings, because lenders will have to compete more aggressively to retain market share,” said Bose George, analyst at Keefe Bruyette & Woods.
Also weighing on home lenders is the potential financial fallout from the widespread use of what are known as exotic mortgages. In the past few years, many borrowers have opted for adjustable-rate mortgages, which offer low introductory rates but result later in much higher payments when rates reset.
More people are subsequently struggling to make their monthly Florida home loan payments, causing delinquency rates to rise slightly. In the U.S. as a whole, delinquencies in the first fiscal quarter hit 4.41 percent, up from 4.31 percent in the same period of 2005. While the uptick has been small thus far, it’s the direction of the trend pointing toward more credit problems that worries regulators and investors.
H&R Block last week set aside a whopping $61.3 million to offset potential losses suffered by its subsidiary, Option One Mortgage. Why? Plenty of recent borrowers of Florida home loans quickly fell behind on payments. A downturn will hit the subprime market first, economists say, as these borrowers tend to be less stable financially.
Another headache for mortgage lenders is the constant stream of negative news on the housing market brought to us by analysts. Fears of a hard landing, in the form of steeper than expected price drops, top the list. Hearing this news constantly causes investors to lose faith in Florida mortgage lenders because of fears that the slump will get worse.
