The big federally backed mortgage firms are under the gun, as investors worry about the firms’ ability to finance the loans they hope will end the country’s housing crisis. 
But Sacramento mortgage brokers said Tuesday they’re confident the region’s real estate market is withstanding the new turmoil – so far.
Fresh fears that the loan market may tighten more haven’t yet affected a region where home sales have climbed rapidly in recent weeks. That’s because home loan rules have already tightened so much during the past year.
“I’ve been doing this for 36 years. This is the most difficult time I’ve ever experienced with underwriting,” said Michael McGee, president of Winchester McGee Financial in Rancho Cordova. “I would venture to say in the next two or three years you will see the lowest foreclosure rate this country has ever seen because you just have to be solid gold to get a loan.”
Fears mounted this week on Wall Street that Freddie Mac and Fannie Mae, the government-backed firms that buy a majority of the nation’s mortgages, may lack the deep pockets to buy more. That could severely limit new loans at the very moment the real estate market needs them most for a recovery.
On Monday, both institutions saw huge drops in their stock values but rebounded Tuesday after assurances they are well-capitalized.
Pasadena-based IndyMac Bank also announced Monday it would suspend its mortgage lending due to defaults and losses on its existing loans.
The uncertainty involving market leaders created the latest set of jitters for real estate markets – including Sacramento’s – that can best be described as fragile. Though year-over-year sales have risen for the first time in 36 months in the area, still more restrictions and fewer loans have the potential to curb the supply of buyers and stall a recovery, brokers said.
McGee said his firm is already rejecting one in three loan applicants under the current lending rules.
Whether those restrictions get tighter is open to debate. Federal Reserve Chairman Ben Bernanke announced a crackdown Tuesday on the exotic loan products offered to risky borrowers that fueled the housing boom.
But Sacramento brokers and others said the market has already taken care of that: Most of the loans Bernanke has in his sights haven’t been available for a while.
“Gosh, it’s almost nine to 12 months ago that these loans stopped,” said Brent Wilson, mortgage strategist with Sacramento’s Comstock Mortgage.
“That, in some ways, is how government reacts. It’s kind of behind the curve,” said Dustin Hobbs, spokesman for the California Mortgage Bankers Association.
Mortgage consultant Beth Gewerth of Mason-McDuffie Mortgage Corp. in Sacramento said many who might have gotten the riskier loans in the past are now using government-backed Federal Home Administration loans. Those require 3 percent down payments.
Many are also using “gift” programs by Sacramento’s Nehemiah Corp. of America. In those transactions, Nehemiah covers the down payment and is reimbursed by the seller. The buyer essentially buys a house with little money down.
Brokers said the recent boost in home sales locally is largely due to borrowers with good credit and the ability to put money down. But they said they’re hearing that mortgage insurers may start requiring 10 percent down payments instead of 5 percent in so-called “declining markets” like Sacramento.
Still, Gewerth said the economic system will somehow keep the loans coming.
“As we all know, housing drives the economy,” she said. “They can’t get too exotic. But they have to keep things going so people can purchase homes and keep it going.”
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