Consumer Mortgage Loan Options Are Shrinking

The housing market has taken its toll on the entire economy and the chances for a rebound later this year will depend on how quick the secondary loan markets begin to restore loan programs. The housing market is no different than any other economy, it is based on supply and demand. Home values have fallen an estimated 10% over the past twelve months and this has caused many lenders to simply exit the mortgage business altogether.

This past week Washington Mutual one of the nations largest wholesale mortgage lenders announced they are exiting the wholesale mortgage industry. Wholesale lenders make up a key component in lending. Over seventy percent of all home owners secure their mortgage through mortgage brokers. Mortgage brokers lend money based on relationships with large wholesale or correspondent lenders such as Countrywide, Citigroup, Wells Fargo, etc. In the past six months tow of the largest wholesale lenders (Bank of America & Washington Mutual) have exited this business. This is directly tied into the challenges with the secondary mortgage market, concerns over mortgage broker regulation and a complete lack of faith in the housing markets.

The immediate concern for the economy is that as lenders continue to close down or restrict their lending options, requiring larger down payment or higher credit scores for example this puts more strain on the economics side of the housing market. Without an ability to improve the demand for homes, the excess inventory of homes on the market will continue to put a strain on home prices.

The most logical correction to this challenge will be driven by stimulus packages from the government. Their has already been a significant push to improve liquidity as the Federal Reserve has and most likely will continue to lower home prices. Combined with pending legislation to revamp the lending powers of the Federal Housing Administration (FHA) the government is hoping to help fill a gap in the market that is not presently being covered through the traditional market.

You can utilize these resources to research more information on home loans or current mortgage rates and home refinancing

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