Chief
09-02-2007, 06:54 PM
http://moneynews.newsmax.com/money/archives/st/2007/8/29/95303.cfm?s=al&promo_code=394B-1
Wednesday, Aug. 29, 2007 9:51 a.m. EDT
NEW YORK -- The subprime mortgage crisis is spreading to a somewhat unexpected place: homes costing more than $500,000.
As lending has rapidly gotten more restrictive for borrowers taking out large loans, sales of expensive homes have fallen sharply around the country during what should be one of the busiest seasons for buyers and sellers, mortgage bankers and real estate agents say.
To some degree the change is due to difficulty getting financing, as borrowers are finding fewer lenders willing or able to fund "jumbo" mortgages, loans for amounts greater than $417,000. Such loans are too big to be guaranteed by government-sponsored housing finance agencies Fannie Mae, Freddie Mac or Ginnie Mae.
Given the troubles in the subprime sector, investor appetite for all types of mortgage loans not guaranteed by housing finance agencies has nose-dived.
Banks until recently were able to offload the risk of many jumbo mortgages by selling the loans to investors. But now, as investors burned by the subprime debacle have become extremely picky about what they will buy, banks are having to keep more of these loans on their own books and as a result are charging higher rates.
Some lenders — such as Countrywide Financial Corp. — have made a point of saying they're now most focused on making loans that can be guaranteed by Fannie and Freddie.
Other lenders have simply tightened up their lending standards, for example by no longer making jumbo loans to lenders who can't fully document their income, even if they make large down payments and have stellar credit histories.
The banks that are still making jumbo loans are charging substantially higher rates to compensate for the lack of investor demand. Borrowers who could have gotten rates as low as 6.5 percent in June are now having to pay as much as 9 percent.
**SCHNIPP**
It will bear close watching to see what the Congress and the Bush Administration try to do about this in the coming months. I don't see how they can legislate anything about this without discriminating against one major group of people or another, and pissing off the biggest group of all, homeowners.
Developing...
Wednesday, Aug. 29, 2007 9:51 a.m. EDT
NEW YORK -- The subprime mortgage crisis is spreading to a somewhat unexpected place: homes costing more than $500,000.
As lending has rapidly gotten more restrictive for borrowers taking out large loans, sales of expensive homes have fallen sharply around the country during what should be one of the busiest seasons for buyers and sellers, mortgage bankers and real estate agents say.
To some degree the change is due to difficulty getting financing, as borrowers are finding fewer lenders willing or able to fund "jumbo" mortgages, loans for amounts greater than $417,000. Such loans are too big to be guaranteed by government-sponsored housing finance agencies Fannie Mae, Freddie Mac or Ginnie Mae.
Given the troubles in the subprime sector, investor appetite for all types of mortgage loans not guaranteed by housing finance agencies has nose-dived.
Banks until recently were able to offload the risk of many jumbo mortgages by selling the loans to investors. But now, as investors burned by the subprime debacle have become extremely picky about what they will buy, banks are having to keep more of these loans on their own books and as a result are charging higher rates.
Some lenders — such as Countrywide Financial Corp. — have made a point of saying they're now most focused on making loans that can be guaranteed by Fannie and Freddie.
Other lenders have simply tightened up their lending standards, for example by no longer making jumbo loans to lenders who can't fully document their income, even if they make large down payments and have stellar credit histories.
The banks that are still making jumbo loans are charging substantially higher rates to compensate for the lack of investor demand. Borrowers who could have gotten rates as low as 6.5 percent in June are now having to pay as much as 9 percent.
**SCHNIPP**
It will bear close watching to see what the Congress and the Bush Administration try to do about this in the coming months. I don't see how they can legislate anything about this without discriminating against one major group of people or another, and pissing off the biggest group of all, homeowners.
Developing...