Good News in the Face of Mortgage Problems

October 11, 2007

Every day we hear about mortgage banking organizations closing and certain mortgage products being eliminated.  Stocks of many surviving lenders are low, and it is common to find shares in the industry that have lost 90 percent of their value in the past few weeks and months, according to a report from the National Association of Mortgage Brokers.

This economic downturn is mostly the result of the relaxed credit activity of subprime lenders over the last six years. The interest rates on these subprime loans are now adjusting to higher rates, making them unaffordable to many investors and homeowners, and causing delinquent mortgage payments and home foreclosures. Borrowers with good credit, however, are having no difficulty in making their mortgage payments, and new mortgages are available to them today just as they were a year ago.  Fannie/Freddie/FHA/and VA mortgages are fully available, underwriting is unchanged, and funding for closing as reliable as ever. In fact, mortgage applications are increasing, according to a recent report from the Mortgage Bankers Association.  Subprime loans are still available, but they are more difficult to find and their rates and terms have toughened up.

The rising inventories of unsold homes are benefiting today’s home buyers.  They have more homes to choose from and mortgage financing with historic low rates is still available for buyers with good credit histories.  Sellers are also becoming more realistic in the pricing of their property, and more open to negotiations.