Some Normalcy Is Returning to the Mortgage Market

Whenever we go through these wild gyrations in the market,
the correction to the problem is usually a very conservative
reaction, many times overly conservative.

In the last eight weeks, as the sub-prime mortgage market
created doubt among the investors that the quality of the
loan products was as good as they were led to believe, the
investors also pulled out of the jumbo loan market (those
loans over $417,000).

The absence of liquidity rippled through, from the investors
to the lenders to the cutbacks in lending programs to fewer
opportunities for borrowers to get the loan that they needed.

We are now seeing that after this reaction, that the lenders
are now resuming some loan categories and products that
have been missing for the last two months.

Specifically, there has been a resumption of the stated income
jumbo loan products. These allow borrowers to represent their
incomes without having to provide documentation as proof.
The guidelines have not snapped back to where they were
before the meltdown, but they are moving in the right direction
to benefit borrowers.

At first, the lenders dropped these loans to only 80% of the
home value, but would allow a second loan of 10% so that a
buyer could still purchase a home with only 10% cash down
payment.

Now there are jumbo lenders who will do a stated income
loan up to 95% of the value. The qualifications are somewhat
more stringent than they were before, but at least the program
is now available, which will help many borrowers.

There are also proposals in Congress to expand both the
conforming limits substantially beyond the $417,000 limit and
to the FHA program. In the San Diego area, the $417,000
limit has not served the high-priced areas very well, and FHA
has been essentially dormant for much of the county for quite
some time.

If these changes go through, we will see many more opportunities
for borrowers to obtain favorable financing with the support of
the FHLMC, FNMA and FHA programs.

Keep in mind that our far-reaching lending resources can help
you find solutions to your mortgage needs that many other
lenders cannot provide.