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2007 Denver, CO Mortgage Market Report with a look into 2008.
Here are a few notes and updates for the coming year. All interesting information that needs to be considered when thinking of buying or selling a home in Denver, CO. Real estate in Denver is a great investment and now may be a time that we will all look back to and say "I wish I purchased a home in Parker CO during the market correction that ended in 2008."
I hope your 2007 was prosperous and now that we're into the New Year I thought it would be appropriate offer some insights on the recent significant changes in the mortgage industry that will affect the way we do business.
First of all, as I'm sure we've all heard, the Denver market has been designated by Fannie Mae as a "Declining Market" There has been a lot of confusion as to what this actually means from the financing standpoint. Here's a brief excerpt from the Fannie Mae announcement;
"When a property is located in an area identified as declining, Fannie Mae will now require the lender to offer financing at LTV and CLTV ratios that are five percentage points below the max ratios allowed for the selected mortgage product. For example, when the highest LTV is 100%, maximum financing would be 95% in an area identified as declining. Automated underwriting will generate a message when it appears that a property is in a declining area. If the lender receives this message from AU but has evidence that the property is not located in a declining market, the lender may offer maximum financing"
As usual, Fannie Mae is not specific as to acceptable documentation of the required evidence but in talking with several underwriters it's likely to boil down to the comps within the appraisal. Distance and time (with 90 days) will be determining factors and current listing prices in the area can also be considered.
My gut feeling is that it is going to be very difficult to override the AU findings given the likelihood that lenders will have to buy back any loan granted the exception that goes into foreclosure. It's interesting to note that some investors have already "redlined" the Denver area. Meaning that they consider all the front range counties to be declining regardless of the AU findings.
The 2nd major development is "Risk Based Price Adjustments" on all Fannie Mae-Freddie Mac loans. Starting with FICO's 680 and under, there are significant pricing adjustments which means that clients with credit scores that traditionally have been considered "average" will be subject to higher interest rates.
Enough of the "bad" news..... here's a bit of "good" news...
All of these changes will most certainly drive more business to FHA loans. Both houses of Congress have passed an FHA Reform Bill and these bills are now in committee to iron out the differences. Then it's on to the President for signature. The significant changes are likely to be an increase in the LTV to 98.5% and loan limits to $417,000. For 2008/2009, we will see FHA regain significant market share all over the country
And yes, Aspen Funding is fully FHA/VA certified!
2008 promises to be an eventful and challenging year! Now more that ever it's critical to keep on top of these changes and I hope this information is helpful. Please don't hesitate to contact me if I can be of further assistance.
Sincerely,
Gregory Godbey
Aspen Funding Corp.
445 Union Blvd. Suite 307
Lakewood, CO 80228
Direct (303) 854-2374
Fax (303) 989-4868
email: greg@aspenfunding.com
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