The ‘Villain’ Takes Role of Kindly Hero

Lenders, in all the hackneyed story lines, have been hard-hearted rascals, unconcerned with the needs and dreams of the loving couple seeking to buy their first home.

Landlords too have been depicted in storied fashion as heartless and money-grubbing.

Using that hoary theme, a melodrama, “The Drunkard,” played for a record quarter century at the old Theatre Mart, at 600 N. Vermont Ave., now the home of the Greater Los Angeles Press Club.

But lenders today, caught up in a resurgence of sales and refinancing activity in the real estate and housing industry, have taken a kindlier but still profitable stance during this period of enticingly low interest rates (10%-range) on conventional home loans.

With mortgage rates at their lowest level in almost eight years, home loan refinancing nationwide accounts for more than a third of all lending activity, according to the Mortgage Bankers Assn. of America, and HSH Associates, a Riverdale, N.J.-based publisher of mortgage information, believes the rate will drop another quarter percent this summer. It bases that guess on its weekly survey of nearly 2,000 of the nation’s largest lenders.

The firm’s latest information shows that nationally, the average rate offered for 30-year, fixed-rate conventional loans is 10.05%. California’s average is 9.99%, behind Texas with 9.84% and New York with 9.85%.

Another source, RE/Max of California, notes that the number of days required to sell the average home on the market has dropped from 74 days three months ago to 38 days now, and very soon, predicts Steve Haselton, co-director of the service, it won’t take more than 21 days.

Furthermore, the stable, low-interest range of interest rates has created a vast new market of home buyers.

“For every one-quarter percent drop in interest rates,” according to Robert Head, president of the RELO/Inter-City Relocation Service, “another 500,000 individuals can afford to purchase a home and enter the housing market. Because rates on an average home have dropped in the last 12 months from 13% levels to around 9.5% in many areas of the country, we currently have about 7 million more potential buyers who can now find a home priced within their affordability range.”

He is optimistic about the remainder of the year, forecasting stability in interest rates and expecting them to remain under 10% for both fixed-rate and adjustable-rate mortgages.

Because corporate transfers are a major concern today, firms such as Head’s, Federated Realty Group in Milwaukee, is part of the national RELO network of about 1,200 companies made up of independent real estate brokers who help corporations transfer personnel and provide financial services for home purchases.

Such transfers can result in the two-income family losing one paycheck because so many families today have working spouses. Assuming that the one being transferred will receive a better position and higher pay, the family then must decide on the job future of the other spouse.

Does he or she retire? Or seek some temporary job in the new city, one that might be far less rewarding? Or does the non-transferee remain on the job in the old town and keep working until the family qualifies for a new loan in the new town?

The lender, donning the traditional bad-guy black hat, may now feel that one breadwinner only in this moving family will not qualify for a loan under current loan standards.

But here comes GMAC Mortgage Corp. to the rescue, perhaps in an unlikely role, but just as the hero would in the old melodrama.

The firm’s relocation division, which specializes in mortgages for transferred families, has announced a creative approach to alleviate the situation.

First, the corporation, a subsidiary of General Motors Acceptance Corp., defines “trailing spouses” as wives or husbands who follow their relocated mate to a new job in another city.

GMAC’s senior vice president, Karl Reinlein, says that more than 60% of transferred families depend on double incomes before they relocate and that the company transfer usually eliminates one paycheck. Recognizing that drastic change, the firm will now include the trailing (temporarily jobless) spouse’s “potential earning power” as a factor when it figures family income for loan qualification.

“When it comes to obtaining a mortgage on a new home, which most relocated families want to do, the terminated income becomes a major obstacle,” Reinlein said. “The relocated employee is guaranteed a job with the company but who guarantees that the spouse will find work again?

“Traditionally, those families have had a rough time securing a mortgage for the size home to which they’ve been accustomed. When there is only one income, instead of two, most lenders loan less money.”

GMAC’s mortgage program will guarantee that the spouse’s potential income will be added to total family income, as long as certain criteria are met, even if a secure job hasn’t been confirmed.

“GMAC has always felt it important to consider the potential earning power of a transferred spouse but until now outcomes were uncertain. Now, we’ve convinced an investor to back loans of this nature exactly as if they were dual-income loans,” Reinlein added, cheerfully.

“We’ve gone the extra mile to obtain the financial help couples need when looking for a new home in a new city. It’s hard enough to go through the trauma of moving and adjusting to a new job without facing a mortgage crunch as well.”

All of which certainly removes the possible scenario of an insensitive lender demanding, “Your money or your wife--or spouse.”