August 9, 2007

Mortgage Crunch

Housing Market Weakens As Mortgage Industry Takes Cure
By James R. Hagerty

"This week is going to be a nightmare," says Melissa Cohn, chief executive of Manhattan Mortgage in New York. Lenders are scaling back so fast that it isn't clear which loans are available or on what terms, and rates are jumping even on large loans, known as jumbos, for prime borrowers.

These stricter lending standards reduce demand for homes and nudge some people who can't refinance toward foreclosure. Higher foreclosures add to a glut of homes on the market in most of the country. And, completing the vicious circle, a weaker housing market comes back to bite the lenders by wiping out owners' equity in their homes and increasing the risk of even more foreclosures down the road.

"The market is in a panic," says Larry Goldstone, president of Thornburg Mortgage Inc., a lender in Santa Fe, N.M. He says he thinks the mortgage-bond market, which supplies most of the money for home mortgages, will calm down within a few months, but the housing market may need at least another year or two to heal.

Wall Street Journal

Central banks moves to counter liquidity crunch
ECB, Fed, Bank of Canada take steps to calm jittery market

The European Central Bank loaned 49 firms a total of nearly 95 billion euros ($131 billion) -- the most it has ever provided -- after rising worries about spillover from difficulties in the U.S. subprime mortgage market left banks uneasy regarding lending to each other.
Across the Atlantic, the Federal Reserve carried out a $12 billion one-day repurchase agreement, on top of an earlier $12 billion 14-day repo.
Later Thursday, the Bank of Canada said it also provide liquidity "to support the stability of the Canadian financial system and the continued functioning of financial markets

CBS MarketWatch

Mortgage crunch hits Bay Area hard because of jumbo loans

Many lenders now only want to make loans that can be purchased by Fannie Mae or Freddie Mac, the two quasi-governmental entities that help provide liquidity in the mortgage market. Those two entities cannot buy jumbo mortgages.

"If your (mortgage) is above the Fannie Mae/Freddie Mac limit, even if you're a prime borrower, you will see a significant increase in the rates being charged," said Doug Duncan, chief economist with the Mortgage Bankers Association in Washington, D.C. "If you're not a prime borrower, you will have a hard time getting credit today."

Duncan said jumbo loans are carrying interest rates of 7.5 percent to 8 percent, 1 to 1.5 points higher than a month ago. "This is a big run-up, and we expect it to significantly delay the housing recovery, if it stays there for a while," he said.

Another category feeling the pain: Home buyers who can't make a 20 percent down payment.

Its more important than ever to use the search capacity for mortgage rates at Your Property Path

No comments: