Wow!!! We are in the most tumultuous mortgage market many of us have ever seen regardless of experience level. What is happening? The implosion of the sub prime market, the poor performance Alt-A mortgages and the rate of foreclosures on other non-conforming mortgage loans, have created the "perfect storm". As a result you may be hearing a phrase like "liquidity crunch". This simply means that there is an ever shrinking pool of investors that will buy these types of loans.

All mortgage companies, from the monstrous Countrywide to the small one branch bank, and everyone in between, relies on investors to buy the loans they

originate. Some of you may have heard of are Fannie Mae and Freddie Mac. Government subsidies and reliable automated underwriting engines are keeping them healthy and protected. However, they won't buy a mortgage over $417,000. The rest have to rely on Wall Street or other investors to buy those loans. Would you want to buy an investment with such a terrible recent track record and future outlook? Neither do they. American Home Mortgage, a leader in ALT lending mortgages closed their doors today. They went from being purchased to save themselves on Monday to locking the doors on Friday. They failed to fund over $1,000,000,000 in mortgages in the first 3 days of this week. They were unable to find investors to buy the loans and provide the funds. These were loans that were approved and were settling. Were you involved in any of these transactions?

Every lender is trimming their programs they offer and/or changing their program on a regular basis. If nobody is going to buy it, you better change to make it more attractive or get rid of it all together. Less programs, specifically those who cater to credit challenged or first time home buyers, will likely reduce the number of qualified buyers. Does anyone else see this as a problem? Those of you with whom I have worked know I never call about a problem without a solution. So here are some things you can do to protect yourself and your clients.

Buyers:

� Make sure you are using a lender you trust. Leaving it up to your client could be a huge waste of time and money, as well as damage your reputation (did you do your best to protect them).

Encourage them to use someone you trust and take control for their benefit. If they really want to use someone else, you could refuse to work with them or demand they at least talk to your lender as well. This way you may have a back up if things go wrong. It has saved a lot of deals in the past.

� Get pre-approved early, and not just the "cursory" type of approval that lenders have been using for the last couple of years. Require a full review of documents as well.

Your client has to have loan options. The industry is tightening everyday. If they are relying on one option and it goes away, you're both stuck.

The lender has to stay on top of pre-approvals, and notify you and clients of changes. Notification of changes are coming every day and your lender needs to know what clients they might affect and when to change course.

� If your client needs a non-conforming program they need to understand to current state of affairs. Rates are higher, in some cases much higher. Guidelines are changing the fastest in the non-conforming and your lender needs to be on the ball.

� Do not allow your clients to delay anything. An approved transaction is not safe, but a closed one is.

Sellers: (much of the same applies)

� Can they afford to move? They need to be treated like a buyer before a seller. You don't want to pay to market a home if they can't buy their next one.

� Their selling cycle can be long, so make sure the lender is staying on top of things. If things changed that prohibited them from buying another home while you were paying to sell theirs, when would you want to know? Proactive communication from your lender is essential.

� Their bottom line has a lot to do with everything getting done. Have your lender help them determine their bottom line (what they need to net) to make their next purchase work. This will help with price reductions and seller help down the road if necessary.

� Call every lender that writes a letter on your listings. Ask them what things look like, what contingencies they have with other programs, who is the lender, what type of program they are using, etc. Everything outside of government (VA, FHA) and Freddie and Fannie backed programs should be intensely scrutinized. (I can supply you with a great list of questions that agents have been asking us.)

� If your sale is contingent on the sale of another property, and so on, and so on, refer to the previous tip and go as far as you have to down the trail to make sure all lenders involved have control of their financing options.

This is just the beginning of what you can do to protect the interests of your clients and yourself.

ust this week we have seen a nearly .5% increase in the rates on a Jumbo loans (in excess of $417K), while seeing a decrease in conforming loan rates. This will continue as time goes on until the investor appetite for these loans returns. However, as outlined above, were any of your sellers using Jumbo financing to buy their new home? A .5% increase in rate could make a huge difference. Is their lender telling them this? Moreover, does their lender even know its happening?

This is just the start of sweeping changes in my industry that will more than trickle down to yours. And much like the afore mentioned savings and loan debacle, it is going to be a while before the dust settles. This market demands hard work and is made so much easier if everyone if on the same page. I am always available to share information, ideas and strategies with those working to make a difference. Take care and hang in there.