The Squeeze……………
May 5th, 2008 Categories: "Say What? Just Some Real Estate Talk
It is starting to become crunch time and you will be hearing a lot of jaw boning.
Approximately 65% of the banks have positioned themselves to minimize approving refinancing or new home loans according to a recent poll.
Things are difficult now but will get a lot worse before things get better.
As reported in the Los Angeles Times (Sunday, May 4, 2008: Author: Kenneth Harney) banks have taken further steps to curtail other type mortgage loans, such as:
- Cash out refinancing
- Loans with less than full documentation of borrowers income, credit and assets
- Mortgages for certain second-home purchases
- Investment loan applications in which the buyer already owns at least three other rental properties.
- Mortgages to borrowers with nontraditional credit
- Short term construction loans that convert to permanent mortgages
- Adjustable rate mortgages in which the first adjustment occurs within 60 months after closing.
Freddie Mac has announced that it will restrict financing of second homes and real estate investment purchases.
Freddie Mac has also noted that they will not finance properties of any kind if the individual has four or more properties. So it appears for the time being that 4 is the magic number. Own four and financing for other real estate properties could be difficult, if not impossible.
Lenders indicate that the steps being taken are in areas they see as inordinate risks.
It is surprising that the people who created the problem (sub-prime mortgages and credit cards) are the same people who are squeezing out people interested in various type of mortgage loans.
Those individuals who are seeking loans based on “stated income” do not stand a chance of getting any type of mortgage in the near term (or as someone stated: maybe never).
So consumers have very few options and will have to accept for the time being that mortgage loans will be extremely difficult to get. Tighten that belt.
Steps being taken by the various financial institutions will negatively impact the real estate market, especially new home buyers. If you are a real estate investor lots of luck in getting a mortgage.
