Nashville company beats mortgage bust

Monday, May 12, 2008 at 2:43am

A Franklin-based mortgage company has flourished in recent years despite the downturn in the industry as a whole.

“In [2003] when this thing moved the other way,” explained Dan Crockett, CEO of Franklin American Mortgage Company, “We said, ‘No.’…We did it once, it killed us.”

Crockett, who purchased the company in 1994, said Franklin American was burned by a similar sub-prime mortgage bust that year, the reason why the company did not offer those kinds of mortgages to borrowers a few years ago when other lenders were heavily pushing them.

The executive shared his story when he spoke at a quarterly business breakfast hosted by Lipscomb University and the Nashville Business Journal on Friday. Crockett said the easy credit during those years created incentives for lenders who established a market that should not have been there.

“We created this marketplace,” he said. “Twenty-five percent of the people over the last four or five years that have been able to get a mortgage have never in the history of our country been able to get financing to buy a home.”

While Crockett said the industry has some responsibility, and acknowledged that there has been predatory lending, however, he cautioned that consumers have some responsibility as well. Loans with no money down that require very little monthly payments do not encourage home owners to be fully invested in their properties so it becomes easy for them to walk away, he said.

“I want everybody in America to be a homeowner. But it is also a privilege to own a home in the United States,” Crockett said. “You have to show fiscal responsibility, you have to be able to manage a budget, make your payments, and we are not doing our consumers any good by allowing them to come in and get in over their [head].”

While mortgage companies suffer nationally from losses and as many file bankruptcies, Crockett said the first quarter of this year was Franklin American’s best yet. The company projects it will earn $15 billion in sales this year.

Nashville’s housing market has taken a slight dip, with April housing sales down 28.5-percent over the same month last year, and sales are down 28-percent for the year-to-date over 2007. Inventories are also up, according to the Greater Nashville Association of Realtors, increasing to 24,670 units from 20,129 in April of last year. Housing prices, though, have remained relatively constant, with the median price of a single-family house at $180,000 up from $177,900 last year.

“I can’t see housing continuing to appreciate in any great pace for the next 12 to 18 months. I think the peak of the foreclosure market will be this summer,” explained Crockett, but he did call the Nashville market, “resilient.” The bulk of sub-prime mortgages were issued to Tennessee borrowers in 2005, and most of those have rates scheduled to adjust upward this year.

Other depressors on the market could also include a slow down in building starts because inventories are so high. Crockett said that is especially so for the downtown condo market, “From a demand standpoint, I think it’s going to struggle.”

Franklin American is a privately held company with 550 employees.

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