Monday, October 6, 2008

Mortgage money aplenty, if...

Over the last several weeks we've been hearing in the news that the global credit crunch has been roiling the credit markets and taking it's toll on everything from the hedge fund industry to automobile companies. And we've seen the reports on how borrowers are having more trouble getting car loans and student loans. So it may follow logic to many observers that getting a mortgage loan has become more difficult within the last month.

Yet there is plenty of mortgage money out there. Why, you ask?

It's because over 85% of all US mortgage lending is controlled by the Federal government*. With the recent takeover of Fannie Mae (FNMA) and Freddie Mac (FHLMC), the US Treasury became the "nation's mortgage lender".

And these loan guidelines haven't changed significantly over the last several months (except for the elimination of seller financed DPA for FHA loans). So this means that a vast majority of those who could qualify for a conventional or other government loan before the credit freeze can qualify for a loan now.

What about the 10-15% of the market that isn't federally controlled? Well, this is where we have seen some contraction. Most of this market consists of portfolio products - unique loan programs offered and held by banks and lenders. These types of products provide a very valuable service (such as Jumbo financing) but they are declining in availability as the tough credit market persists. Chevy Chase who just exited the wholesale mortgage business, is an example. So if you need a high balance jumbo loan you may have trouble finding the loan you need at a rate you can afford.

Recommendation: contact your loan officer to discuss your needs and find out what's available before you write off your ability to get a loan.

*Market share as of Q2 2008: GSEs ~75%, FHA ~10%, VA & USDA ?

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