Volatile Mortgage Market

Volatile Mortgage Market
So what is​ going on​ with all the​ mortgage companies? Either they shutting their doors down or​ some of​ them stopped funding loans .​
For one,​ it​ all started with Alt-A mortgage loans and jumbo loans .​
Alt-A are loans which were made to​ borrowers whose credit score was not so perfect,​ that is​ right below 640 FICO,​ who were self employed,​ could not prove their income .​
Jumbo loans are loans that are above conforming limit of​ $417,​000 .​
Any loan amount that is​ below $417,​000 is​ considered conforming loan and Fannie Mae and Freddie Mac,​ the​ two government backed companies are purchasers of​ these loans.
However; as​ you​ may have seen on​ TV,​ Alt-A loans and jumbo loans are loans that are causing problems as​ of​ right now as​ banks cannot sell these loans to​ open market,​ get additional funding to​ make new loans .​
So they are stuck .​
No Wall Street Investors are buying these loans and banks do not know what to​ do with its portfolios.
Subprime lenders,​ lenders that only specialized in​ Alt-A and jumbo loans could not find any investors to​ buy these loans and therefore liquidated their companies .​
So know the​ finger pointing starts!
Who is​ to​ blame? Banks for making these loans? Wall Street companies for buying and selling these loans even further? Or even customers that got those loans in​ the​ first place because they did not qualify for conforming loans? Or even mortgage brokers for pushing borrowers to​ get these types of​ loans.
There is​ no answer as​ who is​ responsible for these loans .​
It all started slowly with 1% loans and borrowers who started to​ default in​ a​ huge numbers .​
Than it​ escaladed to​ all non-conforming programs and jumbo loans .​
But there is​ no way to​ know as​ how far this actually spread .​
Yes,​ we are not done yet!
This may get even uglier down the​ road as​ additional adjustable rate mortgages will reset soon again and it​ is​ expected that most borrowers will default again .​
Fed however,​ took one action this week by injecting billions to​ open market.
So far it​ is​ slowly working .​
Still volatile trading as​ you​ have seen news reports all over,​ but Fed is​ trying the​ best .​
But,​ what if​ Fed just lowered the​ interest rate,​ would that fix the​ problem? Yes and No .​
This is​ a​ really tough decision for Fed to​ make and the​ injection of​ funds into open market showed that Fed is​ watching and trying to​ help .​
If Fed lowers the​ interest rate today and later in​ a​ month additional adjustable rate loans are resetting and more borrowers defaulting,​ we would have the​ same exact situation .​
The problem is​ no one knows how many of​ these adjustable rate loans will actually reset,​ no one know how many people will default on​ these loans .​
All we have are simply estimates.
But than there is​ market .​
Most of​ the​ big mortgage companies are traded on​ stock exchange that has been effected by the​ current conditions,​ and of​ course market will react right away to​ this situation .​
Investors get scared,​ start to​ sell quickly in​ every sector,​ and leaves you​ with Dow loosing 100 points easily.
Fed wants to​ wait until September meeting to​ either keep rate as​ is,​ or​ lower the​ rate .​
So far all indication leads that Fed may keep rates as​ is,​ but do not quote me on​ that.
So what is​ next for mortgage market? So far many banks have canceled many loan programs that dealt with jumbo loans and Alt-A loans to​ prevent any future risk .​
Some banks just simply closed its doors down without any notice .​
Some are still struggling and hoping that something will happen in​ the​ future to​ bring their portfolios back.
And above all,​ housing market just killed home prices and many people own more on​ their mortgage than their property is​ worth .​
But it​ not all over yet!
What you​ see on​ TV,​ news,​ etc .​
are banks that are mostly backed by Wall Street Companies .​
However many mortgage brokers work with private investors that can still do Alt-A loans and jumbo loans .​
Loan criteria or​ qualifications may have changes little bit,​ but it​ is​ still possible to​ get a​ loan.
Right now,​ everyone will wait what Fed will do and hopefully they will make the​ right move.

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