The last three to four months have really played havoc on the real estate and mortgage industry along with the various servicing companies that depend on these sectors for a living. August was the month when the bottom really fell out of the mortgage industry, and it’s been a roller coaster ever since. Most of the problems really heated up when the subprime debacle, and the consequences, unleashed it’s wrath causing company after company to either close it’s doors or announce huge losses stemming from this sector of the business.
Since I am in Orange County California, I can tell you first hand that our industry has been hit hard, and one area in particular is the non-conforming or sometimes referred to jumbo market. Typically Fannie Mae ( FNMA ) and Freddie Mac ( FHLMC ) take up the slack for those loans under the current limit of $ 417.000. The market above that limit, the jumbo market, is for the most part dependant on investors on Wall Street who buy and sell these loans.
The debacle with subprime loans has left many of these investors reeling from losses, and possibly more losses to come. The result has been described by some like a train hitting a wall or car going 90 mph with the brakes being applied almost full force. The outcome has been almost a complete erosion in the secondary markets for lenders to sell their jumbo loans when they don’t fall within FNMA or FLLMC linits or guidelines.
Consequently, many of us here in Orange County and in areas of the country where home prices do not normally fall within the limits of FNMA or FHLMC, are without many sources of funds to make these loan. Yes, they are still available, but the availability and certainty of funds has raised interest rates in this sector way beyond normal expectations. Additionally, lenders are changing underwriting guidelines so drastically that only those in the very top categories of income and assets can qualify for these loans.
The word has been spreading for weeks as to the urgency of this issue. The subprime debacle which helped to create foreclosure levels almost unseen is bad enough on it’s own merit. Yet, many outside those issues and wanting to refinance or purchase have almost been cut off at the knees for lack of funds, unreasonably high rates, just because they are above those limits set by FNMA andFHLMC.
So today, we got what may be some potential welcome relief on the jumbo market front after Treasury Secretary, Henry Paulson, was interviewed during his speaking engagements throughout the country. Secretary Pauson made comments today in an interview that just may give both the housing and mortgage industry the shot in the arm that is needed with respect to jumbo loans.
To see a commentary of his interview, please refer to the link below to Bloomberg:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aax4zzPqV9dk&refer=worldwide
In California and seeking expert advice and choices on mortgage lending, see my link below:
http://ocmortgagefinder.com/index.htm
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