If you haven’t heard yet, mortgage rates dipped to another new low. Yesterday Freddie Mac stated that the average rate on a 30-year loan was 4.71%, the lowest rate since the agency began its weekly tracking of long-term interest rates in 1971. But the best rates are only available for borrowers with the highest credit scores and those able to put down 20% or more.
Most lenders have already tightened their lending standards and now discussions are taking place to have FHA-backed loans tighten underwriting standards in 2010. A recently introduced bill (HR 3706) would raise the minimum downpayment for FHA loans to 5 percent and prohibit financing of closing costs. This is a significant change from the current 3.5% downpayment requirement for FHA loans, and the ability for today’s borrowers to roll their closing costs into the loan.
As Tom Waits said, “The large print giveth ($8000 credit), the small print taketh away (tighter lending standards).” I think these new standards may trigger a new wave of volitional foreclosures as desperate sellers will be seeking an ever shrinking pool of “qualified” buyers. This will in turn trigger another steep decline in prices.
WOW take some schooling moron!