The Mortgage Report

Bailout should begin to move us towards some stability

So the Emergency Economic Stabilization Act of 2008 has been passed and is now a major part of our government's plan to smooth the path we must take to return to financial stability. Regardless of how you feel about the bailout philosophically (my attitude: sometimes ridiculous situations call for ridiculous measures), the bailout should at least begin to move us towards some type of stability in the marketplace. It won't cause housing prices to rebound any time soon, it won't make the toxic loan portfolios suddenly begin performing again, and it won't make consumer loans easier to get (at least not immediately), but it will give us all some confidence that the credit markets will begin to function more or less normally in the future.

In the mortgage market right now, there are basically two types of loans: conventional and FHA. Conventional is the standard type of loan for people with good credit, a down payment, and verifiable income. FHA is geared more to the first time homebuyer, who is limited in down payment or credit history, but still represents a sufficient credit risk, provided they are underwritten carefully. In other words, provided you meet the criteria that was used to underwrite home mortgages for ages before greed overcame the saner heads, you can still get a loan to buy a home, and at very attractive interest rates, at least for now.

Hopefully we have learned what we can and can't do. Making loans with no down payments, or fictitious down payments, making loans to those whose only hope of repayment is the appreciation of the value of the property, making loans to those who have no verifiable income…these are some of the things we've proven we can't do.

Let's get back to doing what works, and try to remember that when time are good again.

Carl Trawick is a Mortgage Specialist and Licensed Mortgage Broker with the firm Access e*Mortgage. He can be reached at 904-343-1145 or ctrawick@nefcom.net