American Home Mortgage and its wholesale counterpart, American Brokers Conduit, became the latest casualties of the credit crisis. Last year, this company closed over $58 billion in home loans. Despite being, by all accounts, a well run business, market conditions forced them to file for bankruptcy, leaving nearly $800 million in loans unable to close. Tens of thousands of borrowers have now been left without financing as a result of companies like this going under.
Clearly, with over 100 national lenders having now closed shop in the last eight months, this is no longer a simply subprime lending issue. The credit market is experiencing unprecedented turmoil that, according to Mike Perry, CEO of Indymac Bancorp, is "broader and more serious than past disruptions."
What does this mean to the real estate market?
- Sellers can no longer be reluctant to accept offers or reduce prices. Tightening credit and diminishing mortgage products will continue to reduce the pool of qualified buyers. This, along with the increase in national inventories, means that now is not the time to hold out for the "best" price possible.
- Buyers with credit issues or who have difficulty providing required documentation can no longer sit on the fence. If market conditions change, buyers who qualify for a loan today may not qualify in a few weeks from now for the exact same loan. Just this week, many lenders have stopped offering no-Doc loans, and some lenders have even pulled back on all forms of stated loans. As market conditions continue to hcange, a buyer's pre-approval status can disapppear more quickly, delaying or spoiling the deal.
- Subprime and Alt-A refi candidates, especially those with ARMs scheduled to reset over the next 12 months, need to act now - even those with a pre-payment penalty. ARMs borrowers struggling with monthlyt payments now might be shocked to know that monthly payments can double in some cases once and ARM resets.
What does this mean to you as a buyer/seller?
In choosing your realtor in today's market, you must look for someone who is experienced and dedicated to work closely with everyone involved in both sides of the transaction. We will utilize our experience and resources to help you navigate these turbulent times. Don't place the biggest financial transaction of your life in the hands of a random realtor.
If you have any questions regarding the market, please give us a call!
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