My New Blog

My Blog returns after a short hiatus due to the extraordinary events of the past 2 months. Who could have predicted the volatile financial markets as the credit markets melted down and then froze up. The past 4 weeks have seen a virtual stand-still in home sales and refinancing as nervous buyers and sellers wait to see what is next!

So I was very interested in Saturday’s Washington Post article by Kenneth Harney in his The Nation’s Housing column titled “Surrounded by Ruins, Mortgage Market Remains Intact”. Harney contends that the mortgage market has been effectively “federalized” for the time being. He notes that 90% of new loans are being made through the FHA, plus Fannie Mae and Freddie Mac. These agencies have “unfettered access to global capital at rock-bottom costs” because they are insuring the loans backed by the federal government.

Although loan terms and underwriting standards have been tightened, low down payments of 3% are still available through FHA, whose credit standards are “generous and forgiving” according to Harney. FHA backed loans have come to dominate the mortgage market and there appears to be no decline to that in the future.

Harney also states that the historically low mortgage rates (currently 6.4%) continue to be attractive. Along with the increased maximum loan amounts, $729,750 through the end of the year and $625,000 starting next year, qualified borrowers are still positioned to benefit. Home prices have fallen to levels not seen since 2003/04 making the housing market available to many first time buyers.

So what does it all mean to those of us who make their living serving the housing industry? The best case scenario would be that market interventions would impact the level where realtors, banks, mortgage companies and appraisers can begin to serve consumers again. The basic but critical element of Trust must be returned to everyone involved in the system. Home buyers will re-enter the market when they feel they can trust what is going on. Not only in the areas of home value, but in doing business with those of us that provide them with professional services that they count on. Regaining that Trust may cost more then the $750 billion set aside to stabilize the credit markets.