Credit squeeze, credit freeze, credit system seizures: Everybody knows how severe and painful the global financial breakdown has been - with banks unwilling to lend even to other banks. But what about mortgages and real estate? Can you still get a home loan with less than a 20 percent or 30 percent down payment? Or with a credit score below 720?
Absolutely. It would be a big stretch to label housing the sunny side of the market at the moment, but there's a lot more light there than in most other financial sectors. Consider these facts:
* There is no shortage of money available for home mortgages, no freezing of credit to purchase or refinance a house. Why? Because the American mortgage market effectively has been federalized - at least for now. More than 90 percent of new loans now are being made through the Federal Housing Administration insurance program, plus Fannie Mae and Freddie Mac. FHA is owned by the federal government, and Fannie and Freddie are operating under federal conservatorship. All three have unfettered access to global capital markets at rock-bottom costs because their borrowings are fully guaranteed by the Treasury.
* Loan terms and credit underwriting standards have been toughened up, but you can still put down 3 percent on an FHA-insured mortgage and 5 percent on certain Fannie Mae and Freddie Mac loan programs with private mortgage insurance. FHA's credit standards are generous and forgiving; the agency exists to help people with less-than-spotless credit histories. Fannie Mae and Freddie Mac have raised their credit score requirements over the past year, but buyers and refinancers with scores in the upper 600s can still qualify for loans carrying reasonable rates and fees.
* Despite the global financial system's quakes, mortgage rates not only remain low by historical standards but have actually declined recently. Freddie Mac said 30-year rates dropped to 5.94 percent.
* Maximum loan amounts through FHA, Fannie and Freddie in high-cost local markets on the west and east coasts continue to be $729,750 through December. In January, the high-cost maximum is projected to dip to about $625,000.
* Home prices - pushed by foreclosures and short sales - have rolled back to 2003 and 2004 levels or lower in many former boom markets. As a result, many buyers are coming off the sidelines, making offers and writing contracts. The pending home sales index jumped by 7.4 percent based on purchase contracts signed in August, according to the National Association of Realtors.
Housing and mortgage leaders say consumer worries about the stock market have obscured positive changes in real estate, where pricing pain and downsizing have been facts of life for the past 2 1/2 years.
David G. Kittle, president and CEO of Principle Wholesale Lending Inc. and incoming chairman of the Mortgage Bankers Association, says "the mortgage market has never shut down" despite the global crisis. Money is "clearly available as long as you can qualify for it."
On the front lines, mortgage company owner Jeff Lipes, president of Family Choice Mortgage near Hartford, Conn., says "I don't think consumers really know how free-flowing capital is right now in the residential mortgage market. There are no shortages, no breakdowns. People ought to be aware of that."