JAMES DOUGHERTY
No significant difference

The national economy would benefit more from the reelection of President Bush than the election of his Democratic challenger, John Kerry, according to a national survey of lenders, and many Massachusetts mortgage executives agree. However, most local lenders said they feel the economy follows its own natural cycle that is not necessarily greatly affected by the president.

According to Pennsylvania-based Phoenix Management Services, a majority of lenders polled across the nation said they believe the economy would fare better under a second Bush administration. The findings were part of the company’s “Lending Climate in America” survey.

“The lending community clearly believes George W. Bush offers a more economically sound plan for the economy than does John Kerry,” said E. Talbot Briddell, managing director of Phoenix Management Services.

The company is a management firm that assists companies encountering financial, operational or management difficulties. The “Lending Climate in America” survey is conducted quarterly to gauge shifts in lenders’ attitudes toward the economy.

Sixty-nine percent of the 107 lenders nationwide who responded to the survey said Bush would be better for the economy. Many local lenders agree.

“Republicans, in general, the belief is they watch out Â… they are business-friendly,” said Denise Leonard, Massachusetts Mortgage Association president-elect and senior vice president at Constitution Financial Group in Wakefield.

However, Leonard said the economy tends to move in its own direction, regardless of who is president.

John Brodrick, president of First Service Home Mortgage in Westwood, also said the economy does not depend heavily on the outcome of elections.

“I think it is more of a cycle; elections [simply] take place in the [economic] cycle,” Brodrick said.

Although a president draws fire when the economy is bad and takes credit when it is good, Brodrick said the economy doesn’t entirely depend on who is commander in chief.

“The economy is a lot bigger than the president,” Brodrick said.

Other lenders said the economy could remain stable or improve if Bush remains in office because of the lack of surprises.

“In the short term, the devil you know is better for the market in terms of expectations,” said Charlie Nilsen, regional executive vice president at Gateway Funding in Woburn.

He said with Democratic candidate John Kerry, the impact on the economy is harder to gauge.

Frank Hilliard, vice president of MGIC in Braintree, said if Kerry is elected a series of events are likely to happen, beginning with an increase in taxes and slowed economic development, which ultimately spells out a negative impact on housing and the mortgage industry.

Hilliard said the strong housing market has led the economy’s recovery since the terrorist attacks of Sept. 11, 2001.

“Housing has carried all the way through,” Hilliard said.

For the housing industry, Hilliard said, low interest rates have put more people in homes. However, for a mortgage insurance company like MGIC, low rates aren’t good. Because MGIC makes money on renewal premiums, the refinance boom was not as profitable as it was for many other firms associated with the mortgage industry.

While he admits he’s unsure how much influence the Republican administration had on the strong housing market, Hilliard said tax cuts allowed people to spend extra money, therefore spurring economic growth.

Rating the Future

Leonard said most small mortgage companies, such as the ones located in Massachusetts, favor Republican candidates. She also said keeping Bush in office would prevent panic in the marketplace.

“Uncertainty is what we [the mortgage industry] do worst in,” Leonard said.

Leonard said that, during the Clinton administration, the Monica Lewinsky scandal adversely affected the economy.

“People invested in the market panicked,” Leonard said.

One local lender said although Bush’s strategies have kept the mortgage industry busy, he doesn’t necessarily agree with the president’s actions.

“I recognize a tax cut, without a similar cut in spending, means we are remortgaging our future,” Gary Shusas, president and chief executive officer of Sherwood Mortgage in Boston, said.

Shusas said the tax cuts Bush implemented a few years ago were intended to help the economy, but Shusas said he believes that plan didn’t work, at least not for the long term.

But Shusas admits that whoever is elected doesn’t necessarily mean there will be a major impact on the economy. The economy generally runs on its own cycle, Shusas said, adding that he expects the interest rates to slowly increase regardless of who holds the Oval Office. However, rates could increase a little faster with Kerry in office, Shusas said.

Shusas said today’s situation is not unlike the economic cycle that began in 1992, when the economy began to strengthen, and culminated in the late 1990s, when rates had increased and the economy was strong.

“You’ll probably see this in the next [economic] cycle, no matter who gets elected,” Shusas said.

Some in the mortgage industry said they don’t feel either candidate will heavily impact the economy.

“It probably will not make a significant amount of difference [whether Bush or Kerry is elected],” said James Dougherty, executive director of the Massachusetts Mortgage Association.

Doherty said the principal architect of mortgage rate changes will be Federal Reserve Chairman Alan Greenspan, not the president.

“He [Greenspan] is likely to take independent action after the election, when the political heat is off,” Doherty said.

Rick Fedele, president and founder of Summit Mortgage in Wakefield, said the likelihood of major changes is slim with either candidate in office.

“I don’t see a huge change either way because the [mortgage] industry is so strong,” said Fedele.

The Phoenix Management study found that 16 percent of those surveyed felt it made no difference to the economy’s performance which candidate ultimately takes office.

While lenders keep a close eye on any shifts in the economy that could affect business, some lenders say their customers are doing the same.

“I’m getting a sense that [consumers] are leery of where interest rates are going,” Nilsen said.

At Gateway Funding, Nilsen said, he is seeing more people looking at products with longer terms, such as a 10-year adjustable rate, because they are worried about interest rates going – and staying – higher.

In the national study, 23 percent of lenders surveyed said their customers planned to make new capital investments in the next six to 12 months.

While the study also found that respondents were “noticeably” less optimistic about gains in the economy, some local lenders felt differently.

Brodrick said he felt “very optimistic” about the upcoming months and expects the economy will grow, as long as no major issues occur.

“We can’t have major terrorist attacks on our shores,” Brodrick said. “That’s a huge uncertainty.”

Brodrick said he expects that employers will begin hiring more people, job growth will produce more homebuyers and, although interest rates will rise, home prices will remain firm.

Hilliard said it is hard to predict what a Kerry administration would offer, but tax increases would be likely. If Bush were to stay in office, Hilliard said, more tax credits and reduced federal spending could occur.

Shusas said that Bush’s tax cuts and spending policies have benefited his mortgage business, but argued that unless something is done about enhancing federal revenue, national debt would likely render the economy sluggish.

Ninety-five percent of the lenders surveyed expect the Fed to raise short-term bank rates in the next six months, with most predicting a half-point increase.