I can talk about the strength of our company till I am blue in the face. Here is a state of the union from our Chairman / Third Generation Owner – Jerry Levy.
State of the credit markets April 2008
Although negative stories regarding the credit markets continue to dominate the news, there are some bright spots. After months of sitting on the sidelines, some hedge funds have started investing in mortgage focused companies. For example, Thornburg Mortgage (large jumbo mortgage buyer) has received a capital infusion of over $1 billion, that will allow them to start funding loans again. Likewise, Washington Mutual just announced on April 8th that they have received a $7 billion dollar capital infusion to stabilize their capital picture going forward.
Both these stories suggest that big capital investors such as hedge funds believe that we are at or near the bottom of this major disruption in real estate and mortgage markets. This has to be balanced against Realtor reports of continued decline in home sales in February, albeit the onset of spring should bring a bottom with hopes for the start of a turnaround.
Any optimism may stem in part from the various initiatives in Congress to address the rising foreclosures and their impact on home sales. The overhang of foreclosed homes continues to be a drag on the market and on home prices, and it is this issue that Congress seems focused on in crafting any solutions.
Among other proposals, the Senate would provide tax relief to buyers of foreclosed properties, while the House of Representatives would offer an $8,000 tax credit to any first time homebuyer, for any type property. These incentives are designed to bring buyers back to the market, which would also allow non-first time homebuyers to sell their homes and thereby purchase new ones.
As for us, we have already seen an uptick in our new mortgage activity. Our pipeline of new loan applications has doubled from March 1 to April 1. With interest rates holding at low levels, loan origination activity should continue to increase into the summer as the seasonal growth progresses. Moreover, many economic forecasters suggest that lower interest rates together with congressional incentives should kick start a recovery for the whole economy in the second half of the year.
This past year we learned about the importance of liquidity and being able to meet all mortgage funding requests. Our retail banking offices continue to provide funds availability to meet over 90% of our funding needs. Additionally, our lines of credit would allow us to access over 900 million dollars.
These are difficult times, but if we keep our heads down, we should see an easier business climate in 2009.
Gerald J Levy
Chairman Guaranty Bank
Have a great weekend!