Housing Market Downturn

The sub prime loan market is in trouble as foreclosures climb to record levels.

The US government must be concerned as the housing market accounts for about 10% of all economic activity. The US economy can not stand up to a disaster in housing.

As sub prime lenders have had to reduce lending operations as loan defaults and foreclosures increase Fannie Mae and Freddie Mac are coming to the rescue.

The two giant housing finance agencies are increasing their business of guaranteeing sub prime loans at a time when slack lending standards and falling home prices have translated into rising delinquencies and foreclosures among sub prime borrowers.

The agencies involvement will provide alternatives for borrowers anxious to refinance out of existing mortgages that have or will reset to higher monthly payments. These “toxic” loans in some cases nearly double the borrowers monthly housing costs when the higher rate resets kick in.

While the help of Fannie Mae and Freddie Mac the housing market will receive some badly needed support it is still highly unlikely that all of the challenges with the sub prime lending market will be solved.

This is a time when the old real estate fable of how real estate can only go up in value is about to be severely tested.

If you need to arrange the refinancing of your home mortgage it is likely that the sooner you arrange it the better.

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