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Bailout: Its impact on SCV

Local financial professional says worst is over

Posted: October 3, 2008 9:38 p.m.
Updated: December 5, 2008 5:00 a.m.

Congress approved a historic $700 billion financial industry bailout Friday and President Bush immediately signed it.

But one Santa Clarita Valley financial professional says he doesn't see any immediate impact from the measure.

"Frankly, it's really uncertain, as far as mortgages go, how it will affect our local community," said Steve Stebbins, a 15-year home mortgage consultant with Wells Fargo Bank.

"With the type of loans we've been able to do, (the bad economy) had no effect. Even with the credit crunch we had no funding issues at all on residential home loans. Qualified people have been getting home loans."

The problem lay with sub-prime loans, which often do not require applicants to prove income or the assets they own, Stebbins said.

Because such mortgages were easier to qualify for, buyers could buy more homes, forcing up the cost, Stebbins said.

"Basically we've gone back to mortgage fundamentals where (buyers) must submit income and asset verification to qualify for a loan," Stebbins said. "We're back to the way we did loans 10 years ago."
The second problem with the sub-prime meltdown came when mortgage companies made loans that Wall Street investors purchased.

"And they were doing them at extremely high loan-to-value ratios," Stebbins said.

Potential buyers are proceeding with more caution, he said.

"The market just got so overfraught with people thinking they had to buy now no matter what," Stebbins said.

"The people buying now are buying with much less emotion, and now is the time to buy because we can afford to. But there's a lot more logic and a long-term approach."

The largest group of beneficiaries in the tax portion of the financial rescue bill is about 20 million mainly upper-middle income taxpayers.

The bailout, which gives the government broad authority to buy up toxic mortgage-related investments and other distressed assets from tottering financial institutions, is designed to ease a credit crunch that began on Wall Street but is engulfing businesses around the nation.

"In these past two weeks, we've seen things we never thought we would see before in terms of the economic insecurity of our own country," said House Speaker Nancy Pelosi, D-Calif. She said the measure would "begin to shape the financial stability of our country and the economic security of our people."

Rep. Barney Frank, D-Mass., the Financial Services Committee chairman, said the rescue bill was just the beginning of a much larger task Congress will tackle next year: overhauling housing policy and financial regulation in a legislative effort he compared to the New Deal.

"We were the EMTs rushing to the rescue of an economy that suddenly found itself choking, but now we have to perform more serious reform," Frank said.

Though the economy and housing market is still reeling, Stebbins thinks we might be through the worst.

"I think it with definitely over the course of next two years I see the real estate market continuing to grow," he said.

"People have to live somewhere and especially in Santa Clarita Valley with its desirability. We may have seen a bottoming out, so to speak."


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