Lenders Compete for Borrowers as Credit Markets Improve

Interest rates on U.S. Government bonds were slightly higher last week as stocks surged and the credit markets for riskier debt continued to improve. This put upward pressure on treasury bonds as the government continued to throw billions of dollars at the economy. This in turn has affected long-term bonds, whose rates have increased from 2.50% to 2.93% since the government announced its massive debt-buying program.

What does that mean for the real estate market?  The good news is that the mortgage market and other aspects of the credit markets have seen vast amounts of money being invested by the treasury. This has made availability of mortgages (especially for jumbo loans) more liquid and more competitive. The environment has improved to the point where banks are actually competing for loans, providing much-needed liquidity and increasing the amount of jumbo transactions.

Nevertheless, the loan market has a new face for 2009, as the vast majority of banks still require tax returns and full income documentation even if the loan-to-value is low and the borrower is extremely liquid. This puts real pressure on agents to be aware of every transaction in the marketplace to support loan to value amounts, (read my blog about why you should care about pocket listings) and tends to hurt self-employed borrowers, who can’t necessarily document their income.

Most local lenders seem convinced, however, that some form of reduced documentation for self-employed borrowers will be available by the end of the year. This would help liquidity dramatically. The conforming market (loans up to $729,750) should see improvement in the form of lower rates throughout the course of the year as record amounts of money continue to come in.

For an up-to-date quote on rates, information on refinance, or a compassionate discussion about loan modification or short sales, contact The Bremner Group at 310-571-1364.