it is certainly raining cats and dogs... 
Of course, as we are all aware, these days... it is in deed a Buyer's Market. That has been abundantly clear and demonstrated by the conclusion of negotiations for the property after property across the USA. That continues to be the case, and... even in this Buyer's Market, the mortgage industry continues to be pummeled by changing terms and conditions of loan products.
On Thursday, December 6th 2008, FlagStar Bank, one of the nations largest lenders put out a list of states and communities with those states that are identified as "Declining Markets". California was perhaps the hardest hit with nearly 1/5 of its counties the target of the FlagStar Bank decision. Other states that have been put on the "Declining Market" watch list and that have been hard hit by the additional lending restrictions are, Colorado, Florida, Michigan, Ohio, Virginia and several other states to a lesser degree.
Fortunately, Arizona has not been identified as being in a "Declining Market" ...YET..., but with changes noted above, one could say that the mortgage industry is a tinder box of change with volatility unparallel since the late 1980s. It could be argued that the memo from FlagStar Bank is a signal from Fannie-Mae and Freddie-Mac, that Fannie-Mae and Freddie-Mac are throwing in the towel, and... figuratively saying... "...we're going to distance ourselves, as best that we can, from any borrower who does not have a substantial investment in their purchase..."
Those buyers who use good judgment and act quickly will preserve the best of what is available to them today, in terms of loan product and costs for these loan products. However, buyer's who dilly-dally and want to become "fledgling bond traders", rolling the dice on where interest rates and loan costs land, may well find themselves locked in loan products that are unappealing.
Of course, buyers with credit profiles in the upper 700 FICO range, and above, will fit into nearly any of the loan platforms that remain viable options for mortgage consideration. Therefore the decisions and demography noted in the FlagStar Bank memo do not directly impact these borrowers or their loans YET! However, that does not mean that this pool of buyers don't have to be proactive in taking appropriately expeditious steps to protect the loan products that are available to them TODAY. Working with a lender, such as Pacific Funding Group or Coldwell Banker Home Loans, puts any buyer in the Cat-Bird's chair. Other lenders who are trolling the Internet in search of buyers who are less informed will try to bait the buyers with promises of loan products that are simply not attainable. (SIDE BAR: Visit RealEstateInPhoenix.net for access to all types of mortgage calculators)
If you have been watching the mortgage market, you know that it has been on a roller coaster. On Monday, December 3rd 2008, one of our clients locked an interest rate on a 30 year fixed loan at 5.75 with .125% point. Twenty four (24) hours later, that rate and terms has evaporated and is no longer available. On December 6th 2007 the 30 fixed rate was back up to 6.375. The BOND market will most certainly spin out of control over the next few days with the news that FlagStar Bank has taken steps to identify nearly 1/5 of the USA as being in a "Declining Market"; and again, fortunately Arizona has not made the Hit List yet. And... as we noted above, while the move by FlagStar Bank would not directly impact the loans for buyers with better than good FICO scores, this will impact the type of loans available to the majority of the public as other major lenders adopt similar strategies.
After being in this industry for nearly two decades and having survived similar market conditions, it is our belief that many of the other big players in the mortgage industry will follow FlagStar Bank's move with in the next 15 to 30 days; industry mortgage leaders like Countrywide Home Loans, IndyMac Home Loans, Well Fargo, Bank of America and many others. We have already heard from the Vice President of Coldwell Banker Home Loans today... that Coldwell Banker Home Loans is bracing for even more tightening of mortgage lending parameters over the next few weeks. Today is a GREAT day to be a buyer and an even better day to be a buyer who can make prompt and decisive decisions about their loan platform.
Even though the FED spoke on December 11th 2007 and lower interest rates again by 250 basis points, any movement that was made by the FED will most likely not impact new loans for many months, if at all. These rate reductions are designed to help the wholesale market, the guys/banks who buy money from the FED at the "Discount Window". These types of rate reductions are not designed to help consumers who are profiling new loans.
Lori and I have been in this industry a very long time. We have seen markets similar to this on three prior occasions, however none where course corrections or changes in direction were so rapid. We believe that the rapid course corrections to real estate and mortgage market dynamics are directly related to the speed that information travels at today. Today we have the Internet, in the 1980s, only the military had the Internet, or a very elementary semblance of an Internet. Today, good news as well as bad news travels at lightning speed. The rapid movement of news, good or bad, impacts all industries, but none more dramatically than the Stock and Bond market and Real Estate and Mortgage industry.
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We wish you and your family a very prosperous closing of 2007 and a happy and healthy new 2008.