Thought this is worth posting for some recent explaination of the current mortgage situation.
Local Real Estate

Tighter mortgage market will help continue Valley slowdown
Home buyers need better credit, more cash

Catherine Reagor
The Arizona Republic
Aug. 17, 2007 12:00 AM
Obtaining a home loan is going to get even more difficult.Lending guidelines are tightening almost daily for borrowers as the subprime-loan crisis spreads. Those higher-risk loans have just about disappeared as their default rates soar. Now, financing is getting tougher for all homebuyers.
On Thursday, megalender Countrywide Financial Corp. had to take out an emergency loan to keep operating, and Tucson-based First Magnus Financial Corp. stopped taking loan applications. Magnus is one of the nation's top private lender.Earlier this year, New Century Financial Corp. and American Home Mortgage Investment Corp. filed for bankruptcy. So far, at least 70 mortgage firms have closed or put themselves up for sale since last year. Because of the meltdown in the mortgage market, lenders have begun requiring higher credit scores and bigger down payments from all borrowers. They also are charging higher interest rates to people who want to buy a home for $417,000 or more because fewer lenders want to fund them. The tighter mortgage market will work to slow metro Phoenix's housing market. Real-estate analysts say the new lending restrictions could knock 10 to 15 percent of home buyers out the market because they can't get funding. That could significantly affect the local market, where a record number of homes are for sale and where sales are already down about 25 percent from 2006's pace."The mortgage market has changed drastically in just the past few weeks," said Tom Miner of the Scottsdale-based mortgage firm Miner Kennedy Chmura Associates. "We are getting calls from buyers who can't close anymore because lenders want more documentation or money down." Cheryl Serbic wanted to buy a condominium in central Scottsdale. Earlier this summer, the restaurant manager qualified for an adjustable-rate mortgage that required little down. But a week before she was to close, her lender said she needed a bigger down payment. Serbic called other lenders and got the same bad news."I didn't think I needed a down payment. My friend bought last year without one," she said. "But if the housing market is going to keep going down. I'll save and maybe I'll find a better deal then."Not all the 100 percent financing and no-documentation loans have gone away. But now, lenders are requiring borrowers' FICO scores to be 20 to 40 points higher than last year. A 10 percent down payment, once considered standard, is now required on many more loans. "There was a lot of dumb lending done in the past few years," said Jay Luber of First Horizon Home Loans. "Loan guidelines now are tougher but much closer to normal."
How we got here
In 2003, lenders started offering a slew of new easier-to-get mortgages that enabled the nation's housing boom. Borrowers with bad credit and lower incomes could buy homes by getting subprime loans with higher interest rates. Other borrowers could get in with nothing down and without paying private mortgage insurance by using 80/20 or piggyback loans. The 20 percent was typically a home-equity loan that covered the down payment. Lenders also cut back on the income documentation they required on loans. These "no doc" loans opened the door for people to qualify.The housing market was booming. People thought they could refinance into better loans as home prices climbed. Lenders were making money.Then last year, home prices and sales started to slip. The subprime market started to implode as foreclosures on those loans jumped. Now, the foreclosure epidemic has spread to the Alt-A mortgage market, the segment between subprime and prime loans that includes many 80/20s and no-documentation loans.


Changing guidelines
Lending guidelines are changing quickly.Not only borrowers but sellers looking to move up should make sure they qualify first. The "jumbo" loan market for mortgages of $417,000 has tightened up because mortgage institutions Fannie Mae and Freddie Mac don't guarantee loans above that amount. The investors who would have backed the bigger loans have pulled back, which is part of the mortgage market's liquidity problem.Tighter lending practices are also affecting homeowners looking to refinance. In a slowing housing market, some homeowners who got subprime or adjustable-rate and interest-only loans a few years ago are finding they can't refinance because they don't have a high enough credit score or their house is worth less than they owe. "Now, their rates are adjusting up, and they can't refinance because don't qualify under the new guidelines," said Andy Griffin of Scottsdale-based Core Mortgage Group. "It's a really tough time for a lot of homeowners now, but if people can hold on and make their payments, it will be much better for them than a foreclosure."In its newest report, the Mortgage Bankers Association said mortgage markets are "facing a liquidity crisis of a force and magnitude not seen in decades."It went on to say the ripple effect will be felt throughout the housing market. Those effects are already being felt here in the Valley. "Things are bad and are going to get worse," said Brett Barry, a north Valley real-estate agent.

It's Deal Time with 55,000 Homes Listed

Aug. 19, 2007 12:00 AM

Home sales and building are down in metropolitan Phoenix, but there are other indicators to track where the housing market is headed.Here is a look at some:
• Home listings in the Valley climbed to almost 55,000 in the past few weeks. That's a new high. The number of houses that are marketed for a short sale to avoid foreclosure or are bank-owned is also up. That's good news for buyers looking for deals.
• About 85 percent of the Valley homes foreclosed on in July went back to the lender, according to the Information Market. That means fewer investors bidding on foreclosure properties on the courthouse steps. In many cases, more is owed on the home than what it's worth now.
• Nationally, there are 500,000 to 700,000 new homes built but not sold, according to real-estate consulting firm Robert Charles Lesser & Co. Metro Phoenix's share ranges from 10,000 to 20,000, depending on who's counting.
• Housing analyst RL Brown has revised his 2007 Valley home-building forecast downward to 34,000. He's calling for the same number of new homes in 2008, with the market starting to grow again in 2009.
• The median price of an existing metro-Phoenix home was $265,000 in July, according to the Realty Studies center in Arizona State University's Morrison School of Management. The figure has been hovering between $263,000 and $265,500 for the past two years. Helping the figure from falling is a bigger percentage of Valley homes selling for $300,000 or more.
• The median square-footage for a resale home selling in July was 1,750 square feet, according to Realty Studies at ASU. Last year, the median square footage of resales was 1,650 square feet.It's another sign that bigger and pricier homes are selling.
• Metro Phoenix drew 61,600 new jobs during the fiscal year ending June 2007, for a growth rate of 3.3 percent. However, it's a decline from the 100,000 new jobs created in both 2005 and 2006. Approximately one-half of this decline is related to the slowdown in the construction industry, said Ben Sage, director of real-estate consulting firm Metrostudy's Arizona division.
• New-home prices in metro Phoenix fell an average of 6 percent this year, according to Phoenix-based Belfiore Real Estate Consulting. The firm says new-home prices have dropped 21 percent in the past 18 months. Recently, West Valley cities saw the biggest decline in new-home prices. Avondale's cost for a new house fell 11.9 percent, and in north Buckeye, prices are down 9 percent.
• The median sales price of a home sold in the Las Vegas area decreased to $295,000 in July, according to the Greater Las Vegas Association of Realtors. That's down 5 percent from a year ago. It's also the first time Sin City's median-home price has dipped below $300,000 since April 2005. A record 20,273 homes are for sale in Las Vegas.The housing market is slowing nationally.
In some cases, metro Phoenix is faring better. Real-estate analysts were calling for the market to start to rebound or at least hit bottom this year. Now, many are looking to mid-2008.