So an article in the UT today: Banks less willing to roll out welcome mat on home loans. Link:
http://www.signonsandiego.com/uniontrib/...
All I can say is it's about f#%&ing time. Maybe without bank willing to loan ridiculous amounts in San Diego, we'll hasten the return to rational prices.
Great news for us that have been working hard to save up a down payment.
Anyone in the loan biz can confirm this? If this is true and we're back to 20% down minimum, this would remove a lot of first time buyer from the market.
According to my loan agent: new Fannie Mae rules require 15% down in CA. That's the normal 10% plus 5% since CA is a declining market.
I see this news as having two effects: even less borrowers will be able to afford a home; prices will go down even further.
So much for yet another bad idea on how to turn the housing market around.
- Doug
Awesome!
Maybe HLS will see this, I wonder what the effect of 15% down requirement will be? If you have to have PMI at 15% anyway, wouldn't a buyer just lower their pruchase price target and go 20%? Or is PMI on a 15% down loan a much smaller price?
This story isn't getting a ton of play but I think this will be one of the biggest catalysts for the next phase down in the market, what percentage of the "pent up demand" theory just got benched, I think the amount of buyers with cash in hand isn't that large.
New T-shirt Idea...
"Got 20%"
or a new commercial for the the radio for the mortgage brokers...
"Get 20 or Get lost"
"Just when consumers and the U.S. economy need banks to lend more freely, the mortgage industry is making it harder to borrow". - Alan Zibel and J.W. Elphinstone
I would have to disagree completely with Alan and JW. More easy credit is absolutely NOT what the U.S. economy and consumers need. Especially if its for the purpose of buying over-valued assets.
The rest of the article was very informative. And I am glad to see the industry getting back to it's senses.
The problem is that the industry is not necessarily getting back to its senses. I had a friend close on a house just this week with 5% down on about a $1 million home. I have been getting mixed signals from lenders, but the basic message is that with excellent credit and a qualifying income, the down payment isn't much of a barrier.
I know this ground has been covered, but I would definitely be interested to know what the insiders' perspective is on the state of the down payment requirement.
So much for yet another bad idea on how to turn the housing market around.
Housing will not appreciate until the market bottoms.
FHA still can be done with 3% down (or 0% if using one of the "gift" programs like Nehemiah) for first time buyers. FHA's DTI requirements (both front-end and back-end) are strict enough though that most likely anyone who qualifies should be able to fairly easily afford the monthly payment.
Wonder what may happen though to that program if they start seeing walk-aways not due to unaffordability but due to buyers simply leaving a house thats well underwater.
Easter Miracle AMEN!
New limits on mortgages
Some of the restrictions major mortgage insurers are applying to properties located in markets identified as declining or distressed:
A borrower can't receive more than 95 percent in financing; in some cases, the highest amount allowed is 90 percent.
Loans for investment properties, second homes and manufactured homes are ineligible.
Interest-only, option-payment and two-or three-year adjustable-rate mortgages are ineligible.
Refinances that allow the borrower to extract all of a home's equity are ineligible.
Loan amounts greater than $650,000 are ineligible.
Well this seems to address the concern of price drops bringing in a undesirable element to some areas. I mean, if you don't have 2 dimes to rub together as a down payment, it doesnt matter if the house is 500K or 200K, people who have no business getting a loan won't be able to get one, as it should be.
They are more cautious to loaning money these days not only to home loan but to a wide range of loans. They are running out of cash and the lenders do not trust each other to loan. That is why.
I haven't heard anyone dispute the idea that this problem started, in part, due to loose lending standards and excessive liquidity. I'm not sure how more of the same is going to fix the problem. Lenders have to tighten loan requirements. In other words, when you find yourself in a hole . . . stop digging.
"Just when consumers and the U.S. economy need banks to lend more freely, the mortgage industry is making it harder to borrow". - Alan Zibel and J.W. Elphinstone
"Just when the entire world economy needed banks to stop lending money to anyone with a pulse, they found new and 'innovative' ways to lend money to groups never before able to purchase a home."
- Anyone with a brain in 2004-05
Banks may also realize that $100,000 lent today at 5%, is going to be worth $75,000 in 5 years thanks to +10% inflation.