I’m weary of hearing that the sub-prime market is or was a small portion of the pie in the Puget Sound Region. Certainly, there are many prime conventional loans that were made. But the idea that the originations of sub-prime loans being reduced or eliminated will have a less than meaningful impact is just not reality.
Is Legacy Escrow Service, Inc. the only escrow company in the area that closed a lopsided amount of home loans and refinances that were sub-prime vs. traditional conventional transactions? Was Legacy Escrow Service, Inc. the only company working with loan officers in the sub-prime arena? Hardly. We are a small fry compared to the volume of more established companies and title insurers.
As I mentioned over at RCG, how can I explain away the fact that our refinance volume is down about 70% YOY and that is not due to working with only two loan officers. We worked with scores of LO’s, as any escrow firm does. It means that with the sub-prime market essentially relegated to the “intensive care unit” due to Wall Street liquidity problems and the severe delinquency rates reported, the loan officers that sent work our way are doing significantly less originations. And that “Domino” has squarely hit escrow and ancillary real estate service providers in the rear end.
Seventy one percent of the purchase transactions closed by our office in 2005 alone was 100% financed (largely 80/20 with pre-payment penalties, etc..) and while the number dropped as 2006 went forward we did not see a healthy decline in 100% nothing down purchase transaction until 4th Quarter of 2006. Don’t forget that in EVERY single 100% nothing down transaction our office closed, the purchase price was increased to offset closing costs paid by the seller on behalf of the buyer due to their loan program. And to really make you super dizzy, a few of those were increased AFTER being involved in multiple offer situations. The 100% loan programs played a very central role in housing price escalation. And they will play a central role in making many of these homeowners renters again—-but that is just one fellow’s opinion.
Regarding the sub-prime loans in the region, Jillayne Schlicke remarked in a recent comment:
That’s because Eliz Rhodes was looking at only Seattle and the Eastside.
I have always said that the entire Puget Sound area has been populated with upwards of 8 to 9,000 loan originators whose sole income was only originating subprime: Starting from Pierce, up through King and Snohomish, if you add all three counties in together, there has to way more subprime loans that what she originally stated several months ago.
These folks never learned how to originate prime, conforming, A paper conventional loans and never wanted to learn because they could make so much more money shafting people into a subprime loan due to the high yields being offered by investors.
The cool map is only for the year 2005. Would love to know their data source. My guess is that it came from Firstam/CoreLogic
Jillayne’s comment inspired this post. But the question remains: If our small business was doing a large volume of closings with sub-prime terms, how many did First American, Chicago Title, Pacific Northwest Title, Old Republic, The Talon Group, TransAmercia/Land Title, Fidelity Title, Stewart Title and all the other escrow firms close? I suppose the market will tell us.
The good news is that to an extent, Seattle is certainly not experiencing the problems I witnessed in New England a week or so ago.
“It was an idiotic decision to buy in Massachusetts. I should have bought in Seattle.”- my brother as he was taking me to the airport.