Mortgage Market Update- Market is squeezing borrowers
Lenders have made it tougher for borrowers to obtain mortgage financing in serveral weakening housing markets thereby pompting borrowers to seek properties in less affected areas. In New Jersey, areas such as Newark, Elizabeth, East Orangee etc. have been hit hard by high delinquency and foreclosure rates coupled with excess inventory of homes for sales has lead properties to lose value faster than a car after you drive it off the lot.
Lenders such as JP Morgan Chase, Citigroup and Wells Fargo have tightened their lending standards, making it harder for consumers to get mortgages. Many analysts believe that tighter underwriting practices will spread the point that borrowers with good credit and good down payment are the perferred model buyer. These standards are getting tighter as the credit market continues to hit another blow.
Last Week in the News (summary provided by indymacbank.com)
Fueled by rising oil imports, the U.S. trade deficit in November rose by 9.3% to $63.1 billion, much larger than the $60 billion imbalance expected, the Commerce Department reported January 11. While the United States exported a record $142.3 billion in goods and services, that couldn’t offset the $205.4 billion in imports, including an all-time high of $34.4 billion in imported oil.
With cash-strapped consumers diverting more of their dollars to buy gasoline, same-store sales (open a year or more) increased only 2.2% for the November-December holiday period, well below the 3.6% pace over the same period in 2006, the UBS-International Council of Shopping Centers reported January 10. This was the slowest gain since 2002.
In a speech to a housing and economic forum on January 10, Federal Reserve Chairman Ben Bernanke said that the Fed stood “ready to take substantive additional action” to bolster the nation’s slowing economy. This may indicate further cutting of the Federal Funds rate — the overnight rate at which banks loan one another money — when the Fed meets January 29-30.
The Fed continues to cut rates and this has lead the mortgage rates to be at historical lows comparable to that of early years of the 20th century. But in my opinion the cutting of rates is only part of the equation; the other half invloves the banks lending out more money by slightly decreasing their tigthening of guidelines. The guidelines should be written with more common sense underwriting as I like to call it rather than rigid rule conformity. I would to hear other opinions on this topics, please put in your comments.
Your friend,
