Wednesday, January 25, 2006

Mortgage Lenders Tightening Purse Strings

A report in Realty Times draws attention to recent developments in the California real estate market that indicate lenders are tightening the purse strings on mortgage applicants, shutting out border-line borrowers (which is pretty much anyone whose income is less than $125,000 a year). Here's an excerpt:
For better or for worse, California often gets first dibs on changes in the national real estate market and in what could be an example of the worst case side of that trend, some mortgage shoppers in the Golden State may be the first to be underwritten out of the home buying market.

A data crunching company's new index, designed to help Californians choose less risky housing markets, says California lenders, fearing rising default risk levels, are already more closely scrutinizing mortgage applications.

That could make it tougher for already border-line borrowers to get financing or for existing home owners to tap their equity.

During the last six months of 2005, risk levels for new mortgages statewide increased an average 28.6 percent in the Golden State, according to San Juan Capistrano-based, which for the first time offered such data to the public.

The risk factor is lowest in coastal Southern California and the San Francisco Bay Area and highest in the rural Central Valley. The greatest increases came in the Salinas and Santa Cruz-Watsonville areas. The index trended down in rural areas north of Sacramento.

— The Boy in the Big Housing Bubble