Mortgage Seekers Find Rates Are Down, Credit Tighter
Wed, 17 Sep, 2008Sept. 16 (Bloomberg) -- U.S. mortgage rates are dropping. Good luck getting a loan.
Existing home prices have fallen 7.7 percent since their July 2006 high and rates dropped below 6 percent last week for the first time in more than three months. The obstacle for people ready to buy is finding a willing lender, said Suzanne Bach, senior vice president of New York-based Guardhill Financial Corp., and an 18-year home lending veteran.
``Nobody really wants to take risk anymore,'' Bach said in an interview. ``Deals are getting really hard to do now.''
Lenders including Bank of America Corp. and JPMorgan Chase & Co. keep requiring higher credit scores, bigger cash down payments, and more income than was needed to buy a home during the five-year housing boom. Astoria Federal Savings, a Lake Success, New York-based lender that holds mortgages on its books rather than selling them to investors, has even started discounting annual employee bonuses in calculating income.
About 75 percent of U.S. banks tightened standards on mortgage lending to the most credit-worthy borrowers in the three months ended in July, according to the Federal Reserve's quarterly Senior Loan Officer Survey released Aug. 11.
The average U.S. 30-year fixed-rate mortgage was 5.78 percent yesterday, down from 6.08 percent the week before, according to Bankrate.com. The Fed today left its main interest rate at 2 percent while a jump in the London Interbank Offered Rate to 6.44 percent may cause adjustable-rate mortgages to spike.
Lehman Bankruptcy
Lehman Brothers Holdings Inc., the biggest underwriter of mortgage-backed securities, filed for bankruptcy yesterday, part of the credit crisis which has cost financial firms more than $511 billion in mortgage-related writedowns and credit losses.
Bank of America, the nation's largest mortgage lender, tightened requirements over the last six months for a loan program designed to help teachers, police, firefighters and other public servants afford houses in the communities where they work. The bank used to allow zero-down payments under the program, known as Neighborhood Champions, and now requires at least three-percent down.
``If you live in Miami or Las Vegas, you would have to have at least 5 percent,'' said Bank of America spokesman Terry Francisco, referring to two cities where the median sales price of existing single-family homes has dropped 24 percent and 19 percent, respectively, during the past year.
``We're very sensitive to declining markets,'' Francisco said.
Lending Down
Bank of America granted customers $36.6 billion in first mortgages and $22.8 billion in home equity lines of credit in the first six months of this year, compared with $46.4 billion and $35.9 billion in the same period a year earlier, according to a regulatory filing. Combined, loan originations by the Charlotte, North Carolina-based bank fell by 28 percent, or $22.9 billion.
JPMorgan is assessing local housing markets for price declines that may prompt the bank to stop offering certain types of loans.
``We continue to look at them by market and by product because the price of homes is different in some markets even than it was three months ago,'' said Thomas Kelly, spokesman for JPMorgan Chase. ``We're going to verify your income and your assets. We are going to require more equity and we may require a higher credit score.''
No `Piggyback' Loans
The bank has also eliminated so-called ``piggyback'' loans that allowed homebuyers to borrow 80 percent of the mortgage value at one interest rate and an additional 10 percent of the purchase price at a slightly higher rate.
Source: http://www.bloomberg.com/
