10/2/08

How Does Today's Market Affect Mortgage Lending?

What you and your clients need to know is that mortgage lending is not effected by the market issues we are having today. This is because the entities (Fannie Mae, Freddie Mac, FHA, VA) that provide cash for mortgage lending are backed by our government, so they have all the liquidity they need in order to continue lending for this purpose.Banks, on the other hand, are suffering liquidity issues for purposes of short term lending (ex. student loans, car loans, credit cards, etc.). Banks have lost a great deal of confidence in other banks and, as a result, have become much more restrictive on the money they are willing to lend each other. The fact that the LIBOR rate has nearly doubled in the past 2 months is a big indication of this. Lack of consumer confidence in banks has also contributed to the problem since many people are withdrawing their funds from their lending institutions. This ultimately led to the largest bank failure in US history, Washington Mutual.
Chris Parrish Coldwell Banker Home Loans 817.503.4027