You can put away those wrap-around-mortgage forms, contracts for deed, seller takebacks, silent assumption plans and big balloon loans -- at least for the time being.
America's "creative financing" boom, which was the force behind seven of 10 home resales during most of 1981 and 1982, officially ran out of steam last week. Two new national real estate studies, just completed but not yet publicly released, document how dramatically the financing of a home has changed in less than 10 months.
* If you were similar to nearly three out of four buyers across the country at this time last year, you would have used some type of "alternative" financing tool -- either direct assistance from the seller or an outside source -- to help close the purchase. The odds today are reversed. Only about one of three buyers in most markets now makes use of any form of creative financing. Subtract routine mortgage assumptions (takeovers of low-rate, existing loans) from that number and the proportion drops further.
* Creative "'takeback" financing, where the seller defers part of the home price in the form of either a first or second note, now accounts for barely 10 percent of the market. By contrast, one year ago the n ation's largest mortgage insurer, MGIC Corp. of Milwaukee, found the seller-financing market so vast -- an estimated $60 billion a year -- that it created a special program to insure individual home sellers against defaults or foreclosures by their buyer-borrowers.
The voluem in MGIC's Homeseller program today is virtually nil, according to a corporate source.
* Fixed-rate, long-term mortgages, both conventional and government-backed (FHA-VA), have quickly recaptured their traditional roles as the dominant vehicles used by buyers of new and resale homes. More than 75 percent of a national sample of 800 real estate brokers surveyed by economists said fixed-rate mortgages have re-emerged as their number one sales tool. Last August, by comparison, more than one-fifth of the brokers said exotic techniques such as wraparound mortgages, land contracts and short-term balloons were their top financing methods.
* Home purchasers with more than one mortgage involved (which represented a sizable chunk of transactions last spring, when interest rates hovered near 17 percent) are rapidly declining in number. One of every three home sales arranged by brokers surveyed last year used two loans or more to close the deal. (That is, the home buyer was burdened from the start with a first, second, third and even fourth note -- often in the form of balloon laons, whose lump-sum payoff deadlines troubled tens of thousands of consumers.)
* Lenders overwhelmingly expect to be able to reduce mortgage rates on their standard loans even further as this year progresses. Of 500 top loan officers who participated in a national survey this month, a surprising 45 percent said they think the mortgage-rate floor in 1983 will be below 11 percent. One of 10 lenders expected home-loan rates to dip under 10 percent this year -- more than two percentage points below there they are now.
* A large majority of lenders is bullish about the prospects for residential finance in general: They expect huge increases in total loan volume this year (up 84 percent over 1982) and greater use of adjustable-rate mortgages with longer adjustment periods. (As rates become more stable and inflation remains at low levels, in other words, home lenders plan to offer adjustable-rate mortgages with three- to five-year adjustment erms. Consumers will get quasi-fixed-rate loans, in effect, thanks to improvements in the economy.
The studies that produced these findings were conducted by the National Association of Realtors and by MGIC. The NAR study represented a scientific sample of the organization's broker membership around the country. The MGIC study aimed at the senior lending officers at 250 savings and loan associations, 125 commercial banks, 75 mortgage banking firms, and 50 savings banks.
Put together, the statistics offer fascinating glimpses of how the country's housing financing system had to stretch during the 1981-'82 period of sky-high rates and where it's headed now.
MGIC Chairman Leon T. Kendall, who is a long-time student of the nation's real-estate capital market, said that the cretive-financing techniques that came into play "aren't dead -- not at all. They're fading into the background as the pendulum swings toward lower rates, but they're ready and waiting to be dusted off and put into action again -- whenever consumers need them."
Home buyers and lenders can be happy that rates are down and inflation looks good, "but no one should think we're simply returning to the old days" of the 1950s and 1960s, Kendall added. "To the contrary, we've got a whole buffet table of mortgages to choose from -- creative and traditional -- and they'll stay with us, not disappear."