Mortgage Market Shifts (100% Financing Still Available)

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The Sub-Prime and "Alt-A" markets are shifting.  The "Fed" adjourned their monthly meeting on 3/21/2007 and decided not to change the overnight "Fed-Funds Rate".  The weighing decision came upon the rising cost of inflation and the implosion of the sub-prime market.  In my opinion, I believe that the "Feds" didn't want to make a decision too early and wanted to monitor the situation over the next month or quarter.  In the financial markets, it takes time to receive the true "Housing Starts", "New Loan Applications", and other financial data relative to the market that would be affected by the Sub-Prime Implosion.  "Stated Income-Stated Asset" (SISA), "No-Ratio"(N/R), "No-Doc"(N/D), and Seller-Held Second may become a thing of the past.  These loan programs are still available however the maximum "Loan-To-Values"(LTV) have decreased dramatically. The secondary market wants to see more homeowner's contribute a down payment to their mortgage loan and be able to prove their income to lessen the "Risk" of the investment.  I am personally concerned about current homeowners who initially purchased their home on an Adjustable Rate Mortgage (ARM) through a "Sub-Prime" or "Alt-A" program.  Once those ARMs adjust, will they have had the necessary time or did they take the necessary steps to repair their previous "shaky" credit?  If not and if they cannot handle the adjustment or be able to be approved for a new loan, you may see an increase in the foreclosure markets, property values going down because of the foreclosures in the surrounding area, and the rental market increasing.  One thing is for sure, Mortgage-Backed Security Investors are not pleased with a high percentage of non-performing loans.  So much so that most have required the seller (Banks) of these loans to the secondary market to repurchase these non-performing loans.  If the lender wasn't financially sound when this request was made, then they had no other choice but to "close-shop"!   Hang on for the ride because I believe that this is just the "edge of the storm".  Underwriting guidelines for these markets will continue to increase and make it more difficult for existing and new home loans to be approved.  The mortgage market as a whole is cyclical and I do believe that after the storm passes, guidelines will become more flexible.  Stay tuned...