Monday, November 17, 2008

Credit Crunch: Now with Extra Crunch

Over the summer we experienced a restriction in lending guidelines that moved most jumbo mortgages to a minimum of 20% equity requirement. Now the dominoes have really started to fall and within the last week we have seen many of our investors move to a minimum of 25-30% equity either for a refinance or a purchase loan in most major markets.
Remember these are for true jumbo mortgage borrowers above the conforming loan limit with stellar credit, ample savings and substantial provable income. What's the impact? I would expect to see continued price pressure on the luxury market as buyers wake up to an even more restrictive lending environment. It will continue to tighten or rates will increase(to compensate for risk) until the loans perform and the foreclosures slow. We still have lower down payment niche programs available within various markets but we fear that major moves by national investors will force others to tighten as well in their regional market. If you are considering refinancing I especially encourage you to evaluate your options now.