Author: Tom Vanderwell (page 7 of 8)

If you’ve been reading this for a while, you’d know that it’s been getting harder to get a mortgage.   Well, today we have proof of it for all to see.   This chart is courtesy of the Federal Reserve (by way of the Big Picture). Some commentary after the chart:

Now for some thoughts:

1. See the line that represents prime mortgages?   Yep, it’s gone continuously up since this started a year ago.

2. See the line for “non traditional?”   Remember back late winter where things sort of “eased off” in terms of credit?  Yep, that’s when those loosened up again.   Well, that’s changed again.

3. Subprime – well, let’s just say that subprime is going the way it should – up so that only those with large downpayments can get them and they end up paying more for them.

So what should you take away from a chart like this?   A couple of suggestions:

1. If you are planning on buying a house or building a house, you better plan on being able to document your income and your assets completely.

2. If you have something “marginal” about your financial profile (income isn’t quite enough, documentation is challenging, credit is spotty) you can expect to have to come up with more of a downpayment and work through more details.   You also might want to consider moving your timeline up and trying to do it now rather than next spring – it’s looking like it’s going to be harder then…..

3. If you are looking to buy a house for the first time, you might have to rent a little longer and save up a little more of a downpayment than you would have.

All is not lost, the mortgage world is not dead, just a bit harder than it used to be.   Call me if you’d like to chat about it.

Tom Vanderwell (616) 292-7559

Okay, here’s an overview of my take on the Fannie Freddie issue:

Do you think the Stock Markets like the Fannie Freddie Bailout?

Uh, that would be a classic example of an initial elation followed by the let down that comes from looking at the details.   I’m not going to get into the details of exactly what was offered, but to focus more on the big picture instead.

So here’s the big picture (in my opinion):

1. The government has acknowledged officially that Fannie and Freddie are financially in trouble.

2. They have also indicated that they are not going to let Fannie and Freddie fail.

3. The Treasury got out their bandaids and have attempted to put a bandaid on the situation.

4. As part of their bandaid solution, they are essentially obligating the entire government and therefore the tax payers, to pay for Fannie and Freddie’s losses.

The markets initially said, “Yeah!  The government isn’t going to let Fannie and Freddie fail!   Our worries over!”

Then the markets looked at the details and said, “Uh, wait a minute, I’m not sure this is really going to work….”

The government is going to be able to prop up “publicly traded companies” by buying stock in them?   Under what rules?

What really happened at IndyMac bank?   Are there really 10,000 people who are going to lose money in a bank?   What’s that going to do to the rest of the banks?

If we’re going to bail out Fannie and Freddie, what impact is that going to have on the Fed’s financial position?   What’s that going to do the overall borrowing costs for the government?   How much of a hit are us taxpayers going to take for all of this?  These are all of the questions that are circulating out there.

Are there any solid answers?  There’s probably only one solid answer.   Ben Bernanke has done a huge amount of studying of the Great Depression and he firmly believes that the 1927 real estate crash caused the depression.   You can be certain that he’s going to do everything in his power to make sure that doesn’t happen again.

Will there be pain?  Yep, will there be Read more