To Market to Market to Do a Big Loan…

What’s going on in mortgages:

Most of the problem this summer was panic, pure and simple. Secondary-market investors, those that provide liquidity for lending banks, were unsure how much risk they had taken on in purchasing exotic mortgages from lenders over the last couple of years, so they substantially contracted their purchasing, which got rid of a lot of those programs (if no one’s buying them, nobody’s selling them). The panic seems to have abated, and most programs that are here now we can expect to stick around. There will even be some expansion of programs over the next six months. The worst is over.

What’s happening to the home market:

Mostly, what’s happening (in Utah) is that no explosion of building can continue forever, unless you have a corresponding influx of population to support it. The population of Utah County is expanding, make no mistake, but not nearly as fast as houses were being built over the last few years. With skyrocketing home prices and new houses going up overnight, anyone that was looking to buy or build did so in the last couple of years. This released a huge amount of market pressure, and that pressure needs time to build back up. Expect small declines in price – especially for new homes – over the next six months, followed by a period of flat or slightly rising prices as the market builds back up some demand.

What’s still good:

Owner-occupied, good credit, cash down purchases
Non-owner, good credit, 10% or more down
100% first-time purchases
Any buyer with cash, good credit, and verifiable income

What’s iffy and/or more expensive:

100% refinances and purchases
Any stated-income programs (90% max LTV on investor)
Pay-option ARMs
Any buyer without documentable, seasoned cash in the bank

What’s gone:

Pay-option ARMs over 90%
100% stated-income programs
95+% stated investor
Pay-option investor purchases of new-built construction
Refinances of construction loans if the property has been listed

What’s back in play:

Seller carrybacks
Owner financing
Commercial building

That’s where we are up to the minute, as I see it. Of course, this morning Citi Home Equity got rid of its last stated-income program, so maybe we haven’t entirely arrested the slide after all.

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