Advertising

The Seattle Times Company

NWjobs | NWautos | NWhomes | NWsource | Free Classifieds | seattletimes.com

Business / Technology


Our network sites seattletimes.com | Advanced

Originally published Wednesday, June 11, 2008 at 12:00 AM

Print

Analysis

Tight credit won't slam home values

Rising defaults and foreclosures and an oversupply of homes are more likely to stunt a real-estate recovery than tighter mortgage standards...

The Associated Press

Rising defaults and foreclosures and an oversupply of homes are more likely to stunt a real-estate recovery than tighter mortgage standards, lenders say.

"I think improvement [in the real-estate market] can occur while standards are still this tight," says Brian Kludt, a senior mortgage planner at Waterstone Mortgage in suburban Milwaukee. "Standards are one of a plethora of factors impacting the housing market."

Fannie Mae, a government-sponsored enterprise and the largest purchaser of loans, has implemented new guidelines that add fees and tighten requirements, placing more scrutiny on credit history, property type and down-payment size.

They're intended to stabilize home prices and stem mortgage-related write-downs at banks.

The goal is to sustain ownership of houses, says Marianne Sullivan, a Fannie Mae senior vice president. The guidelines make it more likely buyers will maintain payments even if there is further pressure on home prices, she adds.

Brian Brady, a managing director at World Wide Credit and author of MortgageRatesReport.com, says any time standards are tightened, there may be a brief period of further weakening in housing.

As underwriters adjust to the guidelines, they're a bit overcautious, Brady says.

With delinquencies and defaults still rising — especially for mortgages given to customers with poor credit — prime mortgages following Fannie Mae and Freddie Mac guidelines have surged in popularity.

Securities backed by Fannie- and Freddie-approved mortgages, known as agency bonds, accounted for nearly 97 percent of mortgage securities in February, according to the Securities Industry and Financial Markets Association.

A year earlier, they accounted for 56 percent. The increase indicates there's still an appetite for mortgages seen as less risky.

Copyright © 2008 The Seattle Times Company

More Business & Technology headlines...

Print      Share:    Digg     Newsvine

advertising

UPDATE - 09:46 AM
Exxon Mobil wins ruling in Alaska oil spill case

UPDATE - 09:32 AM
Bank stocks push indexes higher; oil prices dip

UPDATE - 08:04 AM
Ford CEO Mulally gets $56.5M in stock award

UPDATE - 07:54 AM
Underwater mortgages rise as home prices fall

NEW - 09:43 AM
Warner Bros. to offer movie rentals on Facebook

Advertising

Video

Marketplace

Advertising