Lending Market Meltdown

It's no secret that lenders are hurting or going out of business all across the country. Big names such as American Home Mortgage, Aegis, H & R Mortgage, and New Century have gone out of business. Not even the biggest name in the business, Countrywide, is immune to this meltdown. They recently borrowed about $11.5 Billion from banks in order to fund their own loans. Investors are taking their money out of the lending business, so there is less money to lend. Investors are not buying these loans, which is the reason Countrywide had to borrow money to lend out. Soon after borrowing the huge amount, they let go about 500 employees. This number is sure to grow in the near future.



The problem is that sub prime loans that Countrywide had sold previously are defaulting in large amounts. The borrowers can't refinance because the homes do not appraise at what they bought them for. Foreclosures are sure to keep rising and the bulk of it is still out there. Summer of 2008 to Winter of 2008 may see the most foreclosures because most loans sold were fixed for three years and they will become adjustable in 2008.



What does this mean for buyers? It's good and bad. The good news is that prices are coming down and they may be able to afford more. The bad news is that you have to put down at least 5-10% down to get a loan for most loan programs. Loan programs have been disappearing and days of 100% financing are gone. Banks don't want to take more risk than they are comfortable with, which is why loan programs have been yanked out of the market left and right. The good news is that if you are a first time home buyer, there are programs out there that can help. FHA loans are one of them. They typically require only 3% in down payment and is a competitive loan. If you have more questions regarding FHA or any other loan programs, I would be more than happy to refer you to my loan agent once you contact me.

What does this mean to sellers? Prices keep dropping, so if you have an adjustable loan and if you are able to, refinance your home with a fixed rate mortgage before you are not able to afford the payments and lose your home.

Please email me with any questions at arsalonbadri@yahoo.com.

Thank you.

Sincerely,

Arsalon Badri
Keller Williams Realty
916-821-9807 Cell
www.ElkGroveTrends.com

June, 2007 Sacramento Housing Statistics

Please click on the following link to see the Sacramento area housing market statistics:

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