Another One Bites the Dust

Anyone who has been following the business news over the past month knows that many lenders in the “subprime lending” category have been closing their doors and leaving many homeowners in the lurch. When the first problems started coming to light, about a month ago, it looked like it was just one or two different lenders; but with each ongoing day, it has spread throughout the entire mortgage industry. Now there really is only a small percentage of homeowners who fall into this subprime category overall; however, because most major lenders (and banks) have some interests in this type of loan, we are already seeing loan programs disappear, lending requirements tighten up on the programs that are remaining, and appraisals being scrutinized much more closely then before.
Some states (i.e. Arizona and Ohio), in obvious political moves, are attempting to make illegal some of the programs that lenders can offer in their state, and try to make the brokers and lenders involved in the process guaranty that the borrower will be able to make the payment in the future. Obviously this type of legislation would never pass, let alone withstand a court test. Unfortunately, the effect of these proposals is to make the lenders tighten their loan program guidelines even farther.
Hand in hand with this fallout, we are also seeing interest rates edging upward in an attempt by the lenders to become more profitable on the loans that they are still doing. They are also putting the appraisals under the microscope where they previously would only give the appraisal a cursory look.
On the good news side, though, the lenders and brokers who have been in the business and survived have had their hands in this type of fire before and are quite competent in closing loans with a minimum of fuss or disappointment.

Fixed interest rates for conforming loans (under $417,000) as of 3/21/07(p.m.) are:
(rates quoted are for 0 point loans)

30 year fixed: 6.125% (APR 6.193%) payments are $2,533.73/mo.
15 year fixed: 5.875% (APR 5.988%) payments are $3,490.78/mo.