He mentioned to me this evening as I was picking up my Boulder Bowl and Teriyaki Chicken for dinner, that he had a client tell him today that there are no mortgages available for people who have a credit score less than 750.

We’ve all heard, seen, or read about the housing industry and the changes in lending from banks.  As I mentioned in my post titled “Yes, You Can Still Get A Loan!” there are plenty of loans originating in these harsh economic times.

Communication is a key element in every aspect of our lives.  The media’s job is to communicate the message to the people.  How that message is interpreted by the people can vary on many levels.  In times when there is a massive amount of information flowing from every source of media imaginable, it is vital to understand where you stand in the midst of the changes.  The lack of financial education in our country has been prevalent for so long that we’re now dealing with the consequences.   Education is the tool that must be utilized to understand the meaning of what we hear, see, and read.

If you have questions about how the changes in our banking, mortgage, and real estate industries affect you, please don’t hesitate to ask!

As the banking system has undergone some obvious changes in 2008, FHA has become one of the most chosen products for clients looking for a low down payment.  The VA home loan and USDA rural housing are the two programs still offering 100% financing.

The FOMC acted fiercely with this cut due to evidence pointing to weakening economic activity and a reduction in inflationary pressures.  The financial turmoil and perceived unavailability of credit has caused spending to decrease significantly.  The FOMC hopes the reduction will encourage spending and expects the decline in energy and other commodity costs will reduce the upside risks to inflation.

Being in the midst of the daily information overload as a mortgage professional, I enjoy coming home with the family and turning on the evening news to see how the media will portray the day’s events.  Lately, I have been more than disappointed with the news of the banking system.  As banks fail or are aided by the government, the media provides the message that credit has completely “dried up” for American consumers.  The reality in the lending system now is that there are still loans available.

What we fail to hear is that Americans became used to a banking/lending system that was unconventional and much too lenient.  The performance of these banks was more important than education for those who lend and those who borrow.  This lending system has lead to an unusual amount of defaults in nearly all areas of banking.  The result has been a shift in lending practices.  There are still loans available for any need American consumers may have, but we have reverted to normal qualification standards.

We hear that bank loans have “dried up” or that there is no longer any loans available for consumers.  These claims are extremely vague and rarely come with any facts.  Please know that we are in a transition period to return to normal lending standards and there is still money available to borrow.  Below are some numbers from the Federal Reserve Board’s weekly report.  Note that consumer loans were up 9.5% from August 2007 to August 2008.

The need for education about credit, lending, and overall financial planning should accompany every credit decision.

If you have questions about how the transition period will affect you please comment or email to Conrad Venti.

U.S. Bank Loans (Billions of Dollars)

Federal Reserve Board, “Asset and Liabilities of Commercial Banks in the United States” (H.8)

The rescue plan announced today by the Treasury spoke of a broad plan.  A legislative proposal for lawmakers will be drafted by the Treasury this weekend.  The plan will likely include help from the Treasury to banks who have illiquid mortgage assets.  Buying the mortgage assets at a discount provides relief for the banks and will allow the government to provide help while forecasting a positive return.

Treasury Secretary Henry Paulson said, “I am convinced that this bold approach will cost American families far less than the alternative – a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion.”

For more information about the Treasury’s announcement visit www.bloomberg.com.

Although there has been several significant downturns with Wall Street and banks in our country this week the Federal Reserve felt that inflation is high and lowering the rate could cause an increase in inflation.  The Feds expect inflation to moderate through the next quarter.  Tuesday’s meeting laid the groundwork for a rate reduction before the end of the year.

As always, if you have questions about how this affects you, please don’t hesitate to ask.

FHA or the Federal Housing Administration was established in 1934 to advance homeownership opportunities for Americans.  FHA provides mortgage insurance for banks who lend money to consumers for home loans.  The government security for banks opens an amazing opportunity for homeowners when many other mortgage programs have been negatively affected by the financial market woes.

When I mention the term FHA to my friends, family, or acquaintances more often than not I get the response that people think it is a program offered only to first-time homebuyers.  The FHA loan program is actually designed to provide home loan opportunities for both new and existing homeowners.  In recent years conventional loan programs have evolved to allow homeowners purchase or refinance homes with high loan to value ratios (the amount of your mortgage divided by the value of your home).  These programs became popular because banks would provide great mortgage rates without requiring borrower paid mortgage insurance.  Due to the unfortunate rise in default rates on these loans in 2007 and 2008 many banks have stopped offering these types of loans and the once popular government sponsored FHA loan program has again become a great option for those looking to either purchase or refinance.

You can visit www.hud.gov to learn more about the efforts our government is making to help homeowners make the most of the “American Dream”.