You Have "A+" Credit, the "Cerdit Crunch" Won't Hurt You? Or Will It?

Talking with many people within the industry and clients many people don't understand the the mortgage industries problems are more than subprime loans. And more than Alt-A loans that offered 100% interest only loans. While the subprime crisis spread to Alt-A lenders fairly quickly, A paper or conforming loans escaped the "credit crunch." However, conforming loans may not be able to escape the "credit crunch" forever.

While, it's tough to predict what will happen in 2008 given the market uncertainties, there is a chance the conforming lenders may be the next in line to take a hit. While, Fannie Mae and Freddie Mac have remained stable over the last 6 months, they are not out of trouble yet. If you ask 10 experts about their forecast for 2008, you will receive at least 9 different answers and they all base their forecasts on whether Fannie and Freddie will be able to steer clear of the credit crunch.

The main concern remains, will foreign investors continue to invest in American mortgage backed securities. If foreign investors become reluctant to invest their money in mortgage back securities Fannie and Freddie will be certain to experience problems 2008 and we may see rates increase to 7%-8%, which will hurt the real estate market even more. However, if foreign money supply continues the conforming market should be able to avoid the problems that have faced the subprime and Alt-A sectors.

We have also seen private mortgage insurance companies, such as MGIC, tighten their guidelines and are more reluctant or will no longer insure lower credit scores. This new trend has made it even tougher for people to obtain financing for a new home and/or refinancing their current mortgage.

I remain optimistic that Fannie and Freddie will remain stable through 2008 and the mortgage industry will be in better shape by the 3rd quarter in 2008. However, to be honest this is just a guess from my research and experience, hopefully, I'm right.


Prosperity Financial
Lafayette, CO

Your Mortgage Manager

http://www.colomortgages.net/, http://www.myprosperityfinancial.com/, http://www.3bed2bath.net/


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