If found this article today and believe we must be aware of what is going on in our markets today, that is why i decided to reproduce it in our blog.
I whant to thank Daniel Rutois from Power One Mortgage for sharing this with me and keeping the information available to us all.
In the nation's worst-hit real estate markets, home sellers are suffering a new blow: They're being blacklisted by lenders.
As property values decline and credit markets contract, home lenders nationwide are growing ever more unwilling to finance home purchases in sharply declining housing markets, driving prices down further. In some cases, lenders have ruled out entire geographical regions and property types altogether, most notably high-rise condominiums in South Florida and Las Vegas.
Lenders including BankUnited, a unit of BankUnited Financial Corp. (BKUNA), and Vertice, a wholesale lending unit of Wachovia Corp. (WB), have elected not to lend to some areas or properties because of declining prices. Countrywide Financial Corp. (CFC), the nation's largest mortgage lender, considered a similar move this week before reversing course, and other lenders have tightened underwriting guidelines for slumping markets so as to make financing nearly unattainable.
There are "lists circulating" from banks, says Peter Zalewski, a broker with Condo Vultures Realty LLC, and those lists are pushing down prices when news of the black-marked properties spreads.
Moreover, the blacklisting isn't always obvious. "We don't call it blacklisting," said an official at a large bank. "We just don't write the loan."
The banks are acting to protect themselves in a steep downturn. But the drying up of loans threatens to create a self-perpetuating cycle.
"If mortgage credit dries up, then prices are going to fall more," says Morris Davis, a professor of real estate and urban land economics at the University of Wisconsin-Madison's School of Business and a former economist at the Federal Reserve Board.
Just this week, Countrywide sent shudders through the ranks of mortgage brokers when it sent brokers an email on Monday, the contents of which were read to Dow Jones Newswires, under the heading "Urgent Product Elimination." The message announced the company would stop approving its Fast & Easy and Alt-A mortgages for all high-rise condominiums nationwide, effective almost immediately.
Countrywide's Fast & Easy loans don't require verification of income, brokers said. Alt-A loans are generally provided to buyers with good credit who lack full documentation.
Countrywide reversed its policy a day later without explanation, but the episode demonstrated lenders' reluctance to underwrite mortgages in the country's most uncertain real estate markets. Countrywide did not respond to multiple requests for comment.
Florida's largest bank, BankUnited FSB, drew up a "non-permissible condominium project list" that identified addresses of 191 condominium developments in Florida and Las Vegas for which the bank will not provide financing. The list was reported by the South Florida Business Journal.
For more than half the properties listed in the memo, the bank cited "declining market value" as the reason it would not provide financing. Melissa Gracey, a spokeswoman for BankUnited, confirmed that the list is still in force and said the bank's "very conservative" lending guidelines rule out mortgages for such properties.
In some cases, lenders have blacklisted not specific properties, but entire geographical areas.
In December, Wachovia's Vertice unit stopped writing mortgages for all condominiums in South Florida, says Kasey Emmel, a company spokeswoman.
Wachovia's main lending operation "continues to offer condo products in all markets, including Florida markets," says spokesman Don Vecchiarello.
Blacklisting isn't redlining - the illegal practice of restricting lending on a socio-economic basis - so it doesn't run afoul of fair-lending laws, says Alexander Bono, a partner at Schnader Harrison Segal & Lewis, a law firm in Philadelphia. Banks are allowed "to identify a county when it's based upon something other than socio-economic conditions" and then change its stipulations for lending there, Bono says.
Even when banks haven't officially ruled out entire markets, the stipulations they use before lending in such areas are becoming very stringent, and can leave mortgage credit all but off-limits.
"Companies won't lend" money for purchases in developments that aren't at least 60% filled, says Paul Miller, an analyst at Friedman Billings Ramsey & Co., a unit of FBR Capital Markets Corp. (FBCM). When vacancy rates in a development are higher than 40%, says Miller, "your condo fees go through the roof," since a development's minimum maintenance costs remain static, regardless of the number of residents. And if condo fees remain high - as underwriting logic follows - then homeowners may have a harder time making mortgage payments.
"We're very cognizant of the risks involved" with "condominium developments in particular," says Terry Francisco, a spokesman for Bank of America Corp. (BAC).
Other larger lenders have also tightened standards for mortgages they write in declining regions.
Daniel Rutois
Principal Mortgage Broker
President
954-447-4445 Ph
954-447-4415 Fax
info@poweronemortgage.com
poweronemortgage.com
