Date July 25, 2005
Time 10:00 AM - 11:00 AM
Station CNBC
Location Network Program Morning Call

TED DAVID, co-anchor: The housing industry continues to show no sign of cooling off. Existing home sales came in up 2.7 percent according to the National Association of Realtors, setting a record pace of just over 7.3 million units last month. More people buying more homes means more people taking out mortgages. It's good news for firms like Americana Mortgage Group.

Joining me now to discuss the numbers and health of the real estate market, the president of Americana Mortgage Group, Bob Moulton. He's in New York.

Mr. Moulton, thanks for being with us.

Mr. BOB MOULTON (Americana Mortgage Group): Thank you for having me.

DAVID: What do you think about the numbers?

Mr. MOULTON: Let the good times roll. It's been a nice run. Rates are great, more people are buying houses, and it's a pleasant surprise. We didn't expect to have such a good year that we're having this year.

DAVID: Does it continue?

Mr. MOULTON: That's the million dollar question. We certainly hope so as long as rates remain favorable and as long as job markets remains strong, and as there is limited inventory out there, the year should end up very, very strong.

DAVID: Where do things stand with mortgage applications right now?

Mr. MOULTON: Applications are still strong particularly in the purchase market. The refinance market has died down a bit. '03 was a great year for us in the refinance market. Most borrowers who were going to refinance have done so. In terms of mortgage applications, we're seeing a lot of adjustable rate mortgages and interest-only mortgages.

DAVID: All right. Where are fixed rate mortgages sitting right now?

Mr. MOULTON: We're still under 6 percent on 30-year conforming. We're up a little bit in the last two to three weeks, right about 5.75. Back in June, we're at about 5.5 percent, 30-year fixed, no points.

DAVID: Over the past year, what have people been picking more of: fixed rates or ARMs; and doesn't it make sense to pick an ARM with interest rates growing higher?

Mr. MOULTON: I'm getting a lot of borrowers calling in right now and automatically asking me for 10-year interest only. And this is the borrower who is looking to borrow maybe a million dollars, maybe a jumbo mortgage, maybe in the New York area where houses are going for $1.5 million.

The nice thing about interest-only mortgage is that you can prepay with no prepayment penalty. The following month your payment goes down.

DAVID: Chairman Greenspan, as you know, several weeks ago had comments about them and expressed some concern about them.

Mr. MOULTON: He has done that. Regulators are putting--talking about putting some restrictions on interest-only mortgages and maybe even the option ARM, which could be a potential problem if housing prices do turn the other way. We haven't seen lenders themselves changing any loan to values or increasing credit scores which could be a possibility as a result of Chairman Greenspan's talking.

DAVID: Let me ask you this--you know, I know our viewers get upset when we talk about housing bubbles, they think we're trying to talk down the housing market, which we're not, but it is something you have to keep your eyes open for. I was talking to Ron Insana the other day. My question to him and to you is this: if you have these interest-only mortgages, you increase for lot of people housing affordability. By doing so you end up with lot more houses selling than you might have otherwise. If those people had not access to the money, they might not have bought the homes. The prices of the homes, therefore, would not have gone up as much as they did. Is that issue and is it a concern?

Mr. MOULTON: The interest-only mortgage is enabling the borrower to buy more house than they could not have afforded if it was a fixed rate mortgage. I think they're driving prices up Particularly in areas where there is spec buying or people are buying second home or third home. If someone is looking to buy a house as their primary residence, I don't think they can get hurt over the long run. We are seeing the median home price go up as well, in terms of existing home sales. I think that was $219,000 for the month of June. It is driving prices up as well.

DAVID: OK. Good to have you thanks for being with us.

Mr. MOULTON: Thank you very much.

DAVID: Bob Moulton of Americana Mortgage Group.

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