Continued market deterioration has led to lower rates on true conforming loan amounts (up to $417,000) but has also led to further constriction of lending guidelines, particularly in the jumbo loan market where underwriting times have drastically increased and product availability has decreased.
Spring begins with new guidelines and loan limits from HUD, Fannie Mae and Freddie Mac in an attempt to quell the mortgage woes that are permeating the industry. While their intentions are good, upon closer review it appears that these new guidelines may not help many of those borrowers who are currently seeking relief. A quick over of some of the changes from Fannie and Freddie:
- New “conforming jumbo” loan limits of up to $729,750 for Los Angeles and Orange Counties
- Only applicable to Single Family Residences and condos, no units
- All loans in this new category require full income and asset documentation
- Fannie Mae: No cash-out and no consolidation of 1st and 2nd loans on refinances
- Loan-to-values: 90% for Purchases, 75% for refinance for owner occupied properties
- Freddie Mac: Cash-out refis limited to 75% loan-to-value with a 720 FICO
- Loan-to-values: 90% for Purchase and rate & term refis
Housing numbers continue to look soft as we move into the Spring as well. California's foreclosure rate fell in February compared to January but was up from the fourth-quarter 2007 average, research and data company ForeclosureRadar reported in March. Foreclosure sales at auction in the state fell 15% compared to January, with 16,931 sales at a combined loan value of $6.85 billion. Notices of default dropped 7.6% to 37,362, and notices of trustee sale (which set the auction date and time) fell 20%. The rate of defaults rose 26%, though, compared to the fourth-quarter 2007 average, and foreclosure sales were up 36%. Lenders took back 98 percent of foreclosure properties at auction, "despite offering substantial discounts," ForeclosureRadar reported.
While the current mortgage and housing market situations play out, what should one do? First, it’s officially a buyer’s market and may be an excellent opportunity to acquire real estate. For those who already own property, we at CenTek are suggesting our clients position themselves for a potential refinance as interest rates continue to move down. If you have any type of ARM (such as 5 year or 7 year fixed ARM), we encourage you to take a moment to review your current loan or to call us to confirm when your next interest rate adjustment will occur. For many borrowers whose original loans were written in 2003, this could be your adjustment year. Now is the time to familiarize yourself with when and how the rate adjusts so that we can analyze all possible options with you. With tightening lending guidelines, maintaining a strong credit history and being able to document a minimum of 6 months total living expenses in liquidity are keys to a successful transaction.
CenTek Capital Group is one of the most innovative and established financial sources in the real estate finance market, providing a wide array of real estate financing. We have many new and unique products for all borrowers and properties. Please feel free to contact us at your convenience to review any real estate financing scenarios. We are pleased to handle transactions of all sizes and complexity levels and are always available to answer any questions.
Wishing you a joyous spring,
Gloria Shulman, Curtis Cohen, Justin Bayle, Ted Kachadorian, Bashar Hamad, Nathan Jensen |
