Are All the Credit Markets Frozen?
October 20. 2008
As I left home this morning Federal Reserve Chairman Ben Bernanke was speaking to a congressional committee. The subject concerned the credit crisis and whether another stimulus would be needed to put the bailout monies into the U.S. economy. Apparently lenders are reluctant to extend credit even though the infusion of government funds has increased their ability to lend and to write down "toxic assets".
Interestingly, the home mortgage market has not seen the same freeze of credit. With loan terms and credit underwriting standards tightened, lenders are willing to lend to prospective homeowners. While all this credit problem was growing, almost no lenders were writing FHA loans. Today the FHA loan is the loan of choice for most home buyers. The lenders benefit from the FHA mortgage insurance which gives the lender a level of confidence should the loan go into default. One article that I read stated that 90% of new home loans are being made through the Federal Housing Administration insurance program, plus Freddie Mae and Fannie Mac. FHA is owned by the federal government and Fannie and Freddie are now operating under federal conservatorship. All three are guaranteed by the U.S. Treasury. Properties that fit into the mortgage limit guidelines of these loans are selling and are helping to turn our Inland Empire real estate market back into positive territory.
As I left home this morning Federal Reserve Chairman Ben Bernanke was speaking to a congressional committee. The subject concerned the credit crisis and whether another stimulus would be needed to put the bailout monies into the U.S. economy. Apparently lenders are reluctant to extend credit even though the infusion of government funds has increased their ability to lend and to write down "toxic assets".
Interestingly, the home mortgage market has not seen the same freeze of credit. With loan terms and credit underwriting standards tightened, lenders are willing to lend to prospective homeowners. While all this credit problem was growing, almost no lenders were writing FHA loans. Today the FHA loan is the loan of choice for most home buyers. The lenders benefit from the FHA mortgage insurance which gives the lender a level of confidence should the loan go into default. One article that I read stated that 90% of new home loans are being made through the Federal Housing Administration insurance program, plus Freddie Mae and Fannie Mac. FHA is owned by the federal government and Fannie and Freddie are now operating under federal conservatorship. All three are guaranteed by the U.S. Treasury. Properties that fit into the mortgage limit guidelines of these loans are selling and are helping to turn our Inland Empire real estate market back into positive territory.
posted by shirley harry at 8:27 AM
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