Mortgage Industry in Chaos

It has been a few months since my last entry and frankly, there has been more news about my business than I can keep up with. The subprime market has blown up and has all but disappeared, Fannie Mae has restricted its' credit guidelines on their loan offerings, and just today it was announced that Jumbo lenders have increased their base rate for Jumbo loans(those over $417,000) from around 6.875% to 8%. This will shrink up the high dollar home market for the time being, and worst yet, this will happen throughout the entire country, not isolated to those areas with higher foreclosure rates.

What does this mean for the typical buyer?

Not much, the one thing that will hamper the ability of most buyers is the tightening of credit standards by Fannie Mae. If you have border line credit or if you cannot meet normal income requirements, then it has become much more difficult to get a loan. Also, the loan that was created for self-employed individuals, referred to as a "stated income" loan, has practically disappeared. The only loans that have not seen any recent changes or adjustments are the very standard FHA and VA loans. Perhaps the government has proven smarter than most major lending institutions. FHA and VA loans have rarely made any changes to their loan guidelines and when changes do occur, they are typically minor and do not affect the overall credit worthiness of a borrower's qualifications.

In conclusion, keep an ear open and stay focused on the broader economy as these changes will certainly have an impact and will create a ripple affect to the overall economy. If nothing else, these changes will change the overall consumer confidence level. Look for rates to rise across the board and keep an eye out for the Fed's next move. Although they have done nothing to curb the housing woes of late, it just might be the right time now.