Joe Rogers of Wells Fargo Home Mortgage On The Mortgage Market Mess
Monday, December 22, 2008SUZANNE PRATT: Joining me now for further discussion of the U.S. mortgage market is Joe Rogers, executive vice president at Wells Fargo home mortgage. Joe, welcome to the program.
JOE ROGERS, EXEC. V.P., WELLS FARGO HOME MORTGAGE: Thank you Suzanne.
PRATT: As we just heard in Stephanie`s story, foreclosures are on the rise. How is that growing number of foreclosures affecting the availability of mortgages?
ROGERS: It`s certainly impacted the availability of mortgages for what I would refer to as non-agency mortgages, non conforming prime mortgages, non-prime mortgages themselves and the periphery of loans. There`s ample availability of mortgage money available for both FHA/VA financing, loans that are done through Fannie Mae and Freddie Mac. There`s lots of money available and very affordable at this point in time.
PRATT: Now you told me when we spoke earlier today that the majority of the business that you`re doing right now is refinancing. Now, is this a golden opportunity or would you describe it as a golden opportunity for refinancings for consumers?
ROGERS: I would say that for borrowers who have the availability to refinance today, interest rates have never been lower in my career and that`s going back about 35 years in the mortgage business and probably back into the 1960s before we`ve seen interest rates this low for available borrowers.
PRATT: One of the things though I think that people are a little bit confused by is that you see the Federal funds rate at 0 percent. You see the 10-year bond at 2 percent. Yet mortgage rates while they have certainly come down significantly, they`re still above 5 percent for a 30-year. Why is that? Can you explain for people what that differential is all about?
ROGERS: Sure. Effectively people have driven down the Treasury rates terrifically low because there is no risk, effectively no risk to an investor outside of interest rate risk when they are buying a Treasury. When you buy any other instrument outside of a Treasury, you potentially incur risk. In the case of a mortgage you have credit risk. And with the home values that are under siege, if you will today and other risks that are out there, investors are asking for more of a spread or they`ve widened spreads over Treasuries to reflect that risk that they take on.
PRATT: What is it going to take to narrow that spread so that we may see -- we should historically with the 10-year bond at 2 percent see 30- year mortgage rates more like 3.5-4 percent. So what do you think it`s going to take to narrow that spread?
ROGERS: Two things probably. One, the fact that the Federal Reserve and the Treasury continues to support the mortgage market, continues to indicate that it will purchase mortgage-backed securities and debt from the GSEs. But probably more importantly, the thing that can help the most is the stabilization of the real estate market. When real estate values, the absorption of some of the homes that are on the market today comes to a more stable and a lower level, we will see home values stabilize. That will bring investors back into the marketplace and drive (INAUDIBLE) down a bit.
PRATT: Now do you think that rates are currently low enough to get people back into the market and to inspire people to buy homes?
ROGERS: Clearly that`s the question we`re all wondering. Borrowers, first-time borrowers particularly this is a wonderful time to buy a home because you`re picking up homes with significantly lower values than they`ve been sold at for the last few years or many in a long time at the lowest level of interest rates than we`ve ever seen. So that combination for borrowers looking to buy a home for the first time is ideal. I think that will help drive the market and help other people be able to sell their homes, move up and go from there. So we`re optimistic about that but there are still an awful lot of homes on the market today and we need that overall level to come down to get the level of home values stable, if you will.
PRATT: OK. I think we have to leave it there, some very helpful information. Thank you for joining us me.
ROGERS: Thank you, Suzanne.
PRATT: My guest this evening, Joe Rogers of Wells Fargo home mortgage.
