Tuesday, September 11, 2007

More dismal news for those with ARM mortgages

I'm hesitant to post an article like this but felt like I might miss something in the translation. The info in the article is sobering. The bottom line appears to be that those with ARM's are having a lot of trouble getting permanent financing on their loans that are resetting. Not only that, but now the folks qualified for a loan that WASN'T subprime, no longer qualify for that same loan! What does this mean for you? It just confirms that it's truly a buyers market in Jacksonville. These homeowners will need to get out from under the new payments in a BAD way. Call me today and let's go look at some houses!

Mortgage brokers say one-third of clients failed to close in August
Loan fundings not always the cause of cancellations, survey finds
Tuesday, September 11, 2007

By Matt Carter
Inman News

A new survey of mortgage brokers reveals that one in three prospective home buyers who had signed purchase and sale agreements in August ended up cancelling.

August was a turbulent month for mortgage lenders, as many investors stopped buying securities backed by home loans because of fears of rising delinquencies and defaults.

Not all of the cancellations reported in the survey of 1,744 mortgage brokers by Campbell Communications Inc. were the result of problems funding loans.

Some deals fell through because buyers could not get approved for a loan or withdrew their offer. In other cases the lender did not honor a loan commitment, went bankrupt or stopped funding loans. Interest-rate changes killed some deals, and sellers backed out of others...

But survey designer Thomas Popik of Geosegment Systems did say mortgage brokers reported that about one-third of all subprime mortgage applications -- both purchase and refinance -- were declined in August. A "much lower" percentage of prime conforming and prime jumbo loans were turned down, Popik said.

Popik said 56 percent of subprime borrowers who had signed purchase and sale agreements in August saw those deals fall through for various reasons, compared with a cancellation rate of 21 percent for prime borrowers.

"In general, what's happening in the marketplace is the subprime borrowers are having trouble getting approved, and the prime borrowers are holding back from the transactions, perhaps because they think they might get a slightly better deal later on," Popik said.

When Campbell Communications surveyed real estate agents in 2004 -- when the housing boom was in full swing -- only 4 percent of home purchase closings failed for mortgage-related reasons.

While 33 percent of prospective buyers saw their closings fall through in August, "the flip side is that most people who had planned on buying a new home … were still able to close on those transactions," Popik said. "Whether that situation will persist through the fall and into next year is another question entirely."

A more troubling statistic, perhaps, was the survey's finding that 57 percent of borrowers facing interest-rate resets on their adjustable-rate mortgages (ARM) were unable to refinance. That could push up delinquencies and defaults if those borrowers are unable to manage higher monthly payments.

The problem was more acute for subprime ARM borrowers -- 64 percent were unable to refinance. But 50 percent of those seeking prime conforming mortgages were also unable to move into new loans, the survey found.

The most common issues for subprime borrowers seeking to refinance were the lack of subprime loan programs, and FICO scores that excluded them from other programs, the survey found. Prime borrowers found property appraisals and loan-to-value (LTV) ratios were impediments to refinancing.

Mortgage brokers surveyed said LTVs for prime jumbo loans had tightened substantially, averaging 90 percent, with the minimum acceptable FICO score averaging 679.

Prices Continue to Drop

Prices in the Jacksonville area continue to drop. It's been subtle in some areas, and "in your face" in others. I'm beginning to wonder how appraisers are managing! There aren't hardly any comps to use because sales have been super slow! MLS continues to show numerous drops in price every single day.

How low will it go??? I'll keep you posted...