What happened to all the mortgages?
Along with the dramatic drop in Tampa Bay foreclosure filings has been this equally striking if less-noticed trend — a huge decline in new mortgages.
In 2005-06, during the last real estate boom, 101,506 mortgages were recorded in Pinellas County. Last year, there were just 35,995.
The numbers are even more startling for Hillsborough County. In 2005, 124,983 mortgages were recorded. Last year: only 45,487.
The reasons for the plunge are varied but one thing is clear: gone are the days of "liar loans" and "no-doc" loans available to practically anyone who could fog a mirror, as the old joke went.
"Mortgage qualification standards are much tighter now than before 2006," said Chris Jones, a loan officer with Waterstone Mortgage in Clearwater. "If a customer hasn't purchased or refinanced a home in several years, they will notice that there is much more documentation required."
That typically includes two years of tax returns and W-2 forms, two months of paycheck stubs and two months of bank statements.
"Those documents are now analyzed by the lender much more intensely than before," Jones said. "Once a bank reviews the documentation, there are usually many additional questions that are asked and, in most cases, further documentation is required."
And the answer still might be: No loan.
In Florida, 17.1 percent of all mortgage applications are rejected, according to the personal finance website NerdWallet. That makes Florida the top state for frustrated applicants, with West Virginia coming in second at 15.7 percent.
Another factor in the relatively low number of recorded mortgages these days: fewer refinancings.
Refinancings were a major part of the mortgage business in 2005-06. As home values soared, TV and newspaper ads urged Tampa Bay homeowners to tap their equity to take vacations, pay off credit cards or buy a new car. Thousands refinanced, only to be stuck with big new mortgages when the market crashed and their houses suddenly were worth far less than the amount owed.
Just as it's harder to get a mortgage now to buy a home, it's also harder to refinance an existing home.
St. Petersburg Realtor James Di Martino learned that when he and his wife refinanced last year.
"We were supposed to refinance on a particular day so I didn't make that last month's mortgage payment," he said. "We were in a gray area where we were not quite late but not quite on time. It was a big deal that almost ruined our ability to refinance even though we only owe a third of what our home is worth. You can imagine what would happen to somebody that owes more than a third on a home's value."
Di Martino, who is with the Strickland Property Group, said his experience was not unusual.
"With a lot of our clients who refinance at some point along the way, the common theme seems to be: It's not easy," he said.
The qualifications for refinancing a home are mostly the same as buying a home, Jones noted.
"Refinance volume has decreased significantly over the last few months because of the rise in interest rates," he said. "However, due to the increase in property values, many of the refinance loans that we are doing right now are to pull out equity in the home to do home improvements."
A third reason for the dramatic decline in new mortgages: the large number of cash purchases.
When banks all but stopped lending in 2008, investors and other cash buyers helped keep Tampa Bay's real estate market from totally collapsing. Though cash sales are declining, they still accounted for 22 percent of all single-family home sales in the bay area last year, according to Florida Realtors.
"Sellers are more inclined to accept a cash deal so they don't have to go through the uncertainty of the potential buyer getting a mortgage," Jones said. "I have had numerous customers in the last few years that have made offers on six or seven homes only to be beat out by cash offers."
If buyers takes steps to shore up their finances and improve their credit scores first, they'll be in a better position to get a so-called "underwriting commitment" from a lender before they even start looking for a house.
"It's much better than a pre-qualification letter," Jones said. "It lets the seller know that the buyer is serious and that the buyer will be able to obtain mortgage financing on their home. It puts the buyer in a much better negotiating position."
Contact Susan Taylor Martin at [email protected] or (727) 893-8642. Follow @susanskate.
As interest rates continue to go up, fewer people will be able to afford a home and thus fewer people will be getting mortgages. But if you are in the market, here are some tips before applying:
• Reduce credit card balances. Lenders pay close attention to the ratio of debt to income.
• Improve your credit score. That "plays a huge factor in qualification and effects the interest rate that the customer is offered," said Chris Jones, a loan officer with Waterstone Mortgage in Clearwater.
• Gather the necessary financial documents ahead of time, including pay stubs and tax returns.