Sub-prime Market in Crisis Mode.....

    ...and your prospective buyers, among others, may feel the pinch!  While offering Memphis real estate investors another avenue for their over all portfolio.

This will and is currently having an immediate impact on the sub-prime market here in Memphis. Memphis has a higher percentage of "credit challenged" buyers than most U.S. cities of similar size. The hardest hit areas are going to be the higher REO areas. These areas will end up having a higher rental property rate than even before. Another product will be the "lease to own" with no credit check at higher interest rates. Because the buyers that were getting in to these properties after investors went in and renovated them, were the folks using the mortgage products listed below.

   Memphis real estate Investors willing to take the time to invest in these properties, with the foresight to turn them in to "leased" properties will have a much easier time to lease them out because of the new mortgage requirements. The foreclosed properties will offer a source of options for a lot of investors. Memphis foreclosures are increasing with the rest of the nation, contact a Realtor that specializes in REO properties for more information. The fewer families that can qualify for the lending products mentioned below, the higher the pool of potential clients willing to do a lease purchase or wrap mortgage, to get in to their own home. 

       *** BEGIN QUOTE ***
       The [lending] industry is reacting to the waves of sub-prime borrowers who've defaulted on their ARMs in recent months. The tighter controls should help prevent future borrowers from getting in over their heads and protect them from predatory lenders. But the sudden shift in lending rules could also threaten the homeownership gains made by families since 2000, weaken the recovery of the housing market and potentially slow the economy.

       "It will be a very severe correction (in the sub-prime market), and I think it will last anywhere from six to 12 months, during which many of the lenders who have operated in this market will gradually get pushed out of business," says Chris Flanagan, a managing director for JP Morgan.

       Nearly two dozen sub-prime lenders have already closed their doors or been purchased, and a dozen more are in trouble, according to a report by Credit Suisse. To stem their losses, lenders nationwide are notifying mortgage brokers to cancel loan programs.

Many of them are:

• Reducing loans for 100% of the purchase price.
• Reducing the number of "piggyback" loans, whereby a lender makes one loan for 80% of the purchase price and a second loan for the remaining 20% of the price at a higher interest rate.
• Raising the required credit score.
• Requiring more documentation of a borrower's income and scrutinizing the appraisal and comparable-home sales data....
         *** END QUOTE ***

       To read USA Today's update on what's going on, go to:
http://www.usatoday.com/money/economy/housing/2007-03-04-mortgages-1a-usat_N.htm

       [SOURCE: USA Today]

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