Monday, August 6, 2007

Mortgage loans are hard to come by

With less than perfect credit, mortgage loans are becoming scarce. Even prime mortgages are facing harder scrutiny in underwriting. It is a situation that has been growing slowly over the last couple of years as defaulting subprime loans everywhere hit lenders hard. Foreclosures, I read in a recent news article, are up around 50% now. So it was not surprising to me when a family member of mine called to tell me that getting approved for her mortgage was like trying to squeeze juice from a turnip.

Indeed, this article on the mortgage crisis perfectly described this situation. Some are just not funding any loans, even for those who had been already approved. And no doc loans? Forget it!

Wells Fargo, my mortgage lender, recently took themselves out of the jumbo loan market with a voluntary rate increase that is, needless to say, not competitive. Still others are downsizing their lending departments or getting rid of them altogether. American Home mortgage is in bankruptcy. Another laid off most of its workforce. Countrywide, one of the nations biggest lenders, has seen its stock value crash. The whole picture just looks awful.

I don't like dishing out advice to members of my family, but I did recommend finding an apartment to take time securing a loan. Even in this market, I'm sure you can find something just by taking your time. It just won't be as easy as it used to be. Lenders seem to be looking elsewhere, especially in areas that have been hit hard.

In the meantime, hold on to your houses. Based on a few people's experiences that I know of, its not fun to buy OR to sell right now.

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