2009 Mortgage Trends You Need To Know As a Realtor:

2009 Mortgage Trends You Need To Know As a Realtor:

So what are the trends you need to know over the short view, namely 2009?

TREND #1: The banks are beating a hasty retreat from wholesale lending. They have huge capitalization losses. They must find ways to attract capital, besides TARP handouts and lend less and they deem wholesale to be the most expensive and least efficient business channel in this environment. They won’t be back any time soon.

Trend #2: Continuing downward pressure on property values, exacerbated by rising unemployment, the new lower loan limits, high inventory and lack of consumer confidence, means we will see continuing restrictions on lending parameters.
The MI companies will require a minimum 720 score to insure conventional loans in California and they are capping debt to income (DTIs) at 45 in most cases, two companies are capping at 41% max DTI.
Speaking of DTIs, be aware that Freddie Mac announced effective March 1st, they won’t purchase ANY loans at ANY loan amount or LTV with DTIs over 45! This is huge. Expect next year that the max DTI will be 45 on conventional loans.

Trend #3: All forms of stated income, including verbal verifs and accept plus documentation is going, going, gone.

Trend #4: One in two loans originated in 2009 will be an FHA loan. This is a positive going forward!!!

Trend #5: A 4506T will be pulled on all loans and some form of verification will be run on all Social Security numbers. Fraud is rampant and mortgage bankers are dealing with huge buyback issues from the GSEs.

Trend #6: Lenders will ask much more of appraisers due to market conditions. In fact, Fannie Mae announced a new addendum they will require next year on all appraisals. It is called the MC Addendum (Market Condition). Check it out here. Familiarize yourself with days on market, List to Price Ratios, Absorption Rates, etc.

Trend #7: Traditional affordability products, like Arms and interest only loans, will be unattractively priced or prohibitive from a qualifying standpoint. Remember, investors have no appetite for anything but 30 year fully amortized, fully qualifying, and tried and true, vanilla product.

The one positive is trend #4. The use of FHA financing will help shore-up reseeding housing prices creating a floor in the market. With the enhanced loan limits in Alameda and Contra Costa Counties we will be able to finance up to $625,000 using FHA products. Also, keep an eye out for the FHA 203K “remodel loan” as I like to call it. It is a great tool to help your clients move into REO properties that can use some “botox” or cosmetic improvments.

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