Mortgage Loans Programs Are Shrinking

Just a couple years ago I had a loan officer tell me that she almost never had to turn down a prospective home buyer.  There was almost always a way for her to get a loan for a borrower. 

If all else failed, there was always the so called “liar loans”.  These no documentation loans went entirely by the buyer’s credit report and by their statements.  If they needed to have a certain income the lender would ask them if they made that much…wink, wink.  They nodded and were off to the races.

Many loans were given to people with poor credit or with no documentation of income. Now, because these borrowers have not been making payments the lenders are losing big money.  Some of them have already gone “belly up”.  Others are in serious trouble. 

Many lenders have stopped doing anything close to sub prime loans.  If people don’t have decent credit and a down payment, they will have a more difficult time getting a loan. 

Alice Roe of US Bank discussed the situation with me recently.  She said that she feels a negative momentum building.  She feels that funding sources will dry up for many mortgage brokers. 

Some of the larger lenders, like her US Bank, Wells Fargo and others will likely continue to offer a wide variety of programs.  But they will be much more conservative than they have been in the past.

One has to wonder even about Countrywide, one of the biggest national mortgage lenders.  It’s Chief Executive Officer just exercised his options for 92,000 shares and then sold them all for $28+ apiece.  I wonder what he knows…he should know a lot.  Obviously he thinks it’s a good time to sell. 

Other parts of the country are experienced more serious real estate woes than we are seeing in our area.  We still have buyers, we still are selling houses.  In fact, we are about as busy as we can possibly be.  I believe Alaska will continue to have a relatively healthy real estate market as long as we continue to pump oil and the oil prices continue to be high.

The Mat-Su Valley is actually witnessing a boom in retail construction right now.  These stores will bring in a lot of retail jobs which helps our local economy. These people will all need places to live. Whether they live in a rental unit or a house makes very little difference, it still brings more dollars into our local economy.

If the Alaska economy holds together at all, the Matanuska Susitna Borough will continue to grow.