Investors!

[Danzig]

hmm...countrywide won't be doing loans over 400-some thousand dollars. are those the ones who default the most? the high dollar mcmansion buyers?? some people no doubt are 'house poor'--get ambitious, buy a huge house--and then can't even afford to furnish it.

[Sightseek]

Originally Posted by Danzig

hmm...countrywide won't be doing loans over 400-some thousand dollars. are those the ones who default the most? the high dollar mcmansion buyers?? some people no doubt are 'house poor'--get ambitious, buy a huge house--and then can't even afford to furnish it.

This is completely a guess, but with the economy I have to think these are the harder homes to sell. Rental units will always do well, but I think a lot of buyers feel uneasy buying a home that high when they listen to the news...plus many of them have to sell before they can buy.

[Danzig]

Originally Posted by Sightseek

This is completely a guess, but with the economy I have to think these are the harder homes to sell. Rental units will always do well, but I think a lot of buyers feel uneasy buying a home that high when they listen to the news...plus many of them have to sell before they can buy.

well, than there's the fact that many are going to a required down payment again--so it may just be outside the realm of possibility for many to cough up that kind of cash up front.

[trifecta124]

Originally Posted by Danzig

hmm...countrywide won't be doing loans over 400-some thousand dollars. are those the ones who default the most? the high dollar mcmansion buyers?? some people no doubt are 'house poor'--get ambitious, buy a huge house--and then can't even afford to furnish it.

This is something that I think most people knew would happen. I have been renting because I live in a market where it is very difficult for first time buyers to get involved. I won't buy until I know that I can comfortably afford it.

[Danzig]

Originally Posted by trifecta124

This is something that I think most people knew would happen. I have been renting because I live in a market where it is very difficult for first time buyers to get involved. I won't buy until I know that I can comfortably afford it.

we bought less than we could afford. i enjoy going out for dinner, buying a book, or into a horse, having ready cash to go have fun, more than making payments on things that you then can't afford to have fun with. and it's lucky for us that we do that--my husband has been off work since june 1 with a broken heel, and is on short term disability that pays half his usual check. but we're still kicking along, no sweat!

[pmacdaddy]

Originally Posted by trifecta124

This is something that I think most people knew would happen. I have been renting because I live in a market where it is very difficult for first time buyers to get involved. I won't buy until I know that I can comfortably afford it.

Please John... Tell the truth...you rent because you are a degenerate gambler.

[trifecta124]

Originally Posted by pmacdaddy

Please John... Tell the truth...you rent because you are a degenerate gambler.

Yes.....That may have something to do with it.

[otisotisotis]

Originally Posted by Danzig

hmm...countrywide won't be doing loans over 400-some thousand dollars. are those the ones who default the most? the high dollar mcmansion buyers?? some people no doubt are 'house poor'--get ambitious, buy a huge house--and then can't even afford to furnish it.

i believe that is all the amount govt. agencies will insure.

[Danzig]

Originally Posted by otisotisotis

i believe that is all the amount govt. agencies will insure.

the govt insures loans?

[otisotisotis]

i could be wrong, but i thought agencies like fannie mae backed up loans that were no more than $400k or thereabouts.

[timmgirvan]

417K

[SuffolkGirl]

Mortgages have (had?) become a big business. The loans are written and then bundled together and sold on the secondary market in a Mortgage Backed Security (MBS), thus generating additional money that could be lent out again. With most real estate in the country appreciating there was little risk that the payments on the underlying security (the loan) would not be made. Recently, values have softened if not declined. People who were in a 2/28 (fixed for 2 years then adjusted for 28) were facing murderous increases in their interest rates (the Fed has raised interest rates 17 times!! - although just dropped .5% this a.m.). These people then tried to refinance but the value of their home no longer supports the loan amount. So now they are faced with a criminally high interest rate on a property that is not worth what they owe on it.

FNMA (FannieMae) and FHLMC (FreddieMac) are quasi public entities that were created to alleviate the credit crunch that we may very well be experiencing. Each year they survey the real estate market and set a limit for the amount of the loan that they will buy. This becomes the "conforming" loan amount limit. At present it is set at $417,000 for a single family/condo. One can purchase a property for whatever amount, as long as the first lien does not exceed $417,000 then it is considered a conforming loan. Because FNMA and FHLMC are nominally backed by the government, investors have decided that they only want to purchase mortgages that fit this guideline.

Given the softening RE market, large institutions that purchase MBS have completely lost their appetite for any security that is not backed by FNMA or FHLMC. These institutions have gotten into lots of bond trouble recently, check out Bear Sterns and Goldman Sachs.

This is a very far reaching problem right now. Those individuals and institutions that have a good supply of cash and are not over leveraged should be able to weather this storm.

[wiphan]

Originally Posted by SuffolkGirl

Recently, values have softened if not declined. People who were in a 2/28 (fixed for 2 years then adjusted for 28) were facing murderous increases in their interest rates (the Fed has raised interest rates 17 times!! - although just dropped .5% this a.m.). These people then tried to refinance but the value of their home no longer supports the loan amount. So now they are faced with a criminally high interest rate on a property that is not worth what they owe on it.



This is a very far reaching problem right now. Those individuals and institutions that have a good supply of cash and are not over leveraged should be able to weather this storm.

Alot of what you said is true, however some is not. The Fed did not drop the Fed Funds rate, which it has raised 17 times, it dropped the discount rate .5%today temporarily which allows banks to borrower $, not consumers. This will have no direct affect on the consumer yet, however the stock market will like this today

Non-conforming or Jumbo loans(over $417k) are sold separately and Fannie and Freddie do not buy these types of loans. The biggest problem in the industry is companies that offered option ARMs or negative amortization loans. These loans people did not pay the all of the interest on the loan, they actually add principal to the loan. Many companies like Countrywide and WAMU offered these loans and when home prices slipped or fell, consumers are finding themselves owing more than the home is worth. The home they bought 1 year ago for $500k, is now worth $450k and they owe $510-525k. Imagine that a lot of customers will just let the house go into foreclosure. I personally work in the mortgage industry for another more reputable company and we never offered these types of loans and have not been affected by these problems. The other issue with Non-conforming or Jumbo loans is that investors currently are scared to buy these loans due to uncertainty of their performance. This has driven the price/interest rates up.

Working with a educated mortgage professional you can still find great advice and low interest rates. Currently I am structuring blended Jumbo loans with 2 mortgages and both mortgages on 30 year fixed rates around 6.75%, this is a way around the increases in Jumbo loan pricing.
I hope that helps clarify things