aggressive lending years when people moved into nonconforming products.
Q: What is the value for society when it comes to conforming versus nonconforming loans?
A: Conforming loans are held by Fannie Mae and Freddie Mac and are much more stable. They are like a gold standard and accepted everywhere. Nonconforming mortgage loans are riskier, and the lender needs a higher rate of return to accept the risk. There isn't really a nonconforming market now, and that's a very good thing and certainly more financially responsible. There are still good programs for qualified borrowers without going to nonconforming loans.
Q: How will people look back at the current mortgage era?
A: People will look back at 2012, and maybe 2013, look at home prices and interest rates and say, "I don't know if there was a more affordable time to buy or refinance a home." When it comes to loan quality, there is a very low delinquency rate on the loans made over the past couple of years. The loans are of a very high quality, and that will lead to a more stable market.
Q: What are the results of such stability?
A: During the boom years, there was robust homebuilding, and homebuilding creates jobs in the local economy. We're seeing a lot more new construction and building permits right now. It's almost a correction in the market because, for a few years, there was more inventory than demand. It wasn't as stable of a market then because of the oversupply.
Q: Where are mortgage applicants coming from?
A: I don't have hard statistics, but my initial reaction is that it's people within the current market locations and not people moving into the market. Usually, people flock to local lenders for higher quality of service, and most Realtors have a working relationship with a local lender whom they've done business with in the past.
Q: Is purchase or refinancing driving the lending in your unit?
A: My region covers everything in Oregon outside Portland and along the Northern California coast to Fortuna. Umpqua's home-lending production is up more than 70 percent over last year, and our current balance is 60 percent refinancing and 40 percent purchases.
Q: What influences will cause fence-sitters to take action?
A: I'm currently seeing ... fewer holdouts. The market has picked up substantially in the number of purchases, and the lower-priced houses have seen multiple offers. That encourages fence-sitters to get off the fence. Interest rates can change rapidly, and that can make a $10,000 difference (over 30 years) rapidly. Any erratic changes in the market gets them off the fence sooner; if interest rates jump up, they'll get off. Ultimately, people will have to evaluate the market and see what's right for them, but I don't think timing the market is possible.
Reach Mail Tribune business editor Greg Stiles at 541-776-4463 or email firstname.lastname@example.org. Follow him @GregMTBusiness on Twitter.