Mortgage Issues Update

A letter received from a local mortgage company by my office on Sep 3rd, 2008, containing the following excerpt:

In October 2007 we sent out a letter talking about the changes that were happening across the country and how it might affect us. At the time of the first letter the biggest problems were coming from seven states. That is still the case. Adjustable rates and Option Arms were causing most of the problems and again that is still true. Today, however, the falling values of homes across the country are causing the issue to deepen and broaden. Coupled with high-energy costs the consumer in the US is under tremendous strain. Most experts believe that nationally the real estate market will bottom out sometime in the next 6 months if it has not already. Certainly we all hope this to be true. Our market locally is in a good position to move forward but if the picture is too negative nationally it will continue to slow our recovery locally. Last October we stated, "Locally we are going to have to deal with tighter guidelines, higher interest rates on riskier loans, and some program discontinuations." This has proved to be very true. We have seen programs completely discontinued and are about to experience another round of this. On thing that we did not foresee at all was the total disintegration of FNMA and FMAC. These companies are on the verge of bankruptcy. While most believe the Fed will step in to "save" these companies, no one knows what impact that will have on the market. The next 6 months will hold significant change in our industry."

In addition to the above comments Mr. Shirley also pointed out that Down Payment Assistance (DPA) programs could go away October 1st, 2008. Most lenders are adopting guidelines that will end these programs. Also on Jan 1st, 2009, the minimum down payment for FHA is going up to 3.5% from 2.5%, and Up-Front PMI is going to change, however, the new rates are unknown at this time.

This all equates into two main delema's: First, fewer buyers period! (expecially in the entry level market) Second, an added responsibility on the REALTOR. We must all learn to re-educate our buyers of times past, when money was needed to buy a home.

In the words of the old beekeeper: "No Money - No Honey!"

Portions Printed with permission from Mr. Jim Shirley of Gum Tree Mortgage, Tupelo, MS