Though the mortgage-lending industry has slumped badly nationally, with reverberations felt in the stock market, residential mortgage specialists here say the Spokane areas conservative nature has allowed it to remain relatively unscathed.


Lenders here largely have steered clear of the subprime market, they say, and homes here didnt become dramatically overpriced, as occurred in some larger urban centers. Those factors have helped deter the rapid depreciation in home values that has kept borrowers in those areas from being able to refinance their way out of such high-interest, adjustable-rate, and undocumented-income loans.


Those factors dont mean, though, that the Inland Northwest hasnt been affected by the chaos. Seattle-based Washington Mutual Bank and Calabasas, Calif.-based Countrywide Home Loans Inc., both of which are prominent players in the mortgage market here, have had widely publicized mortgage lending problems that illustrate the fragility of the market nationwide.


WaMu announced in December that it would lay off 3,000 workers, perhaps as many as 500 of them in Washington, and set aside $1.6 billion for fourth-quarter losses related to the subprime lending crisis.


Meanwhile, Bank of America Corp., based in Charlotte, N.C., announced earlier this month that it has agreed to buy Countrywide Home Loans stricken parent, Countrywide Financial Corp., for $4.1 billion, easing concerns that the large national mortgage lender might file for bankruptcy.


Nationwide, job losses in the mortgage lending industry have topped 100,000, says Dave Erickson, 2008 president of the Washington Association of Mortgage Brokers and a real estate broker in Lynnwood, Wash.


Statewide, new mortgage loans in November dipped to their lowest level since the crisis began , Erickson says, but were up last month, and he says hes optimistic following an additional uptick in the first half of this month.


My gut feeling is weve turned the corner, Erickson says.


Erickson says theres been a shift to plain vanilla mortgage packages, and that more risky 100 percent loans are a thing of the past.


Still, he says, housing prices in the state are holding up, and low interest rates are giving the January numbers a bump. He asserts that the real estate climate in Washington state overall is buoyed by the quality of life here.


The state is blessed by being a popular place to live, a vibrant economy, and our property values have not had any significant decrease, Erickson says.


For a local group of mortgage lending professionals who voluntarily split from Washington Mutual in 2007, the last year has been like riding a roller coaster in the rain.


About a dozen employees from Washington Mutual left that financial institution and opened a branch of Irving, Texas-based American Home Mortgage Investment Corp. here. Recently, American Home and some of its subsidiaries filed for Chapter 11 bankruptcy protection, and the company stopped processing new loans, closing its Spokane office.


Since then, IndyMac Bancorp., based in Pasadena, Calif., has taken over the American Home Mortgage loans that were in process and hired all of the people in the office here in what senior loan officer Sherri Rotchford calls a seamless transition.


This month, however, IndyMac also announced layoffs of more than 2,000 employees nationwide, primarily in its wholesale loan division, as the home lending turbulence worsens. None of those layoffs are here, Rotchford says, adding that the people in her office are passionate about the business and are committed to weathering the mortgage-market storm.


Despite the bumpy ride, Rotchford, who also is serving as president of the Spokane Mortgage Lenders Association this year, says she expects business at the Spokane office to grow this year, though perhaps more slowly.


In fact, Spokane is very different from other markets around the country, she asserts, adding that lenders here suffer more from how the crisis is portrayed in the media than anything else.


In Spokane we are in kind of a bubble actually, Rotchford says. Skepticism and fear are driving sweeping changes within the national lending institutions, but thats not all bad, she says.


Most of those conservative changes, we are cheering for in Spokane, she says.


Lauri Mathews, residential sales and marketing manager for Action Mortgage, a subsidiary of Sterling Savings Bank, says that companys volume increased last year, and she credits that to a conservative lending approach.


We have not seen a decline in our business at all due to market conditions. We dont do any subprimethats just not on our product list, she says.


Action Mortgage has an office of 10 people here that originates home loans and services loans for Sterling Savings branches in Washington, Oregon, Idaho, Montana, and northern California.


So-called Alt-A loans, which are considered less risky than subprime mortgages, but tend to have lower credit quality than prime loans, also have gotten caught up in the market downturn. Tom Kuhn, a branch manager here with Seattle-based Western Capital Mortgage and immediate past president of the Spokane Mortgage Lenders Association, says such loans have all but disappeared, reviving the conventional fixed-rate loan as the market standard.


Alt-A, or alternative-documentation, loans, were created for borrowers with clean credit records, but who for various reasons couldnt document their income well enough to qualify for a conventional loan.


Over recent years, though, Alt-A loans reportedly have been made to increasingly weaker borrowers.


Kuhn says there was a full gamut of loans, including both fixed- and adjustable-rate mortgages, under the Alt-A umbrella. The lack of those products might make it more difficult for people who are self-employed, who were typically helped by those types of loans, to get financing, Kuhn says.


Also, he says that more than 210 wholesale and retail lenders have closed nationally, further limiting the number and kinds of loans available to consumers.


The other big change for consumershere and nationallyis a tightening of credit requirements to qualify for loans, industry representatives say.


Just for my company alone, guidelines are stricter now than they were four months ago, but we have a broad range of products. The ones that were cut out should have been gone, anyway, Rotchford says.


Mike Hogan, president of Chimney Rock Mortgage, a mortgage brokerage that has been in business here for about 18 months, says brokers have been made the scapegoats in the crisis to a degree, though they have simply been selling the products that the large lenders made available.


The one misperception that bothers me is they are blaming independent mortgage brokers, but we didnt create the products, we didnt sell them on Wall Street. We were being encouraged by the lenders to sell them. Certainly there are some brokers that are unscrupulous, but they didnt cause the problem, Hogan asserts.


The borrower has a role, the lenders have a role, and the big huge companies buying huge pools of mortgages have a role, Hogan says.


Erickson agrees with that, arguing that the brokers have done a good job of selling the products offered by the lenders. As if to underscore their argument, Merrill Lynch, the huge New York brokerage concern, announced last Thursday that it had a net loss of $7.8 billion last year, partly because of its involvement in the subprime market.


Rotchford thinks the mortgage industry now will change out of necessity, becoming even more conservative, while also adhering to more cautious lending standards.


I think well see people act more responsibly. Overall well see a stronger market for everyone. People need to be guided in the right direction, Rotchford says.


Contact Jeanne Gustafson at (509) 344-1264 or via e-mail at jeanneg@spokanejournal.com.