More excellent information from Norm Hansen at AmWest Mortgage:

From: Norm Hansen
      Thursday, September 18, 2008 10:04 AM

Deb,

In these times of financial stress the question as to availability of financing for consumer homes looms large.

In short…it is there, it is plentiful, and the rates are excellent.

30 year fixed = 6.125% no points (was 5.875% last week).

FHA primary to 97%

FHA “Buy and Fix” = 102%

Jumbos…(forget the new hybrid Jumbo…Norm’s advice).

We have a Jumbo product that is a 5/1 @ 5.375%.

When the conventional Jumbo market comes back within 5 years then switch to a 30 year.

Here’s the bottom line:

Most all conforming loans go through Fannie and Freddie. Which by the way were once government agencies that became private Government Sponsored Enterprises (GSEs). The government is assuring their liquidity. Here’s how it works: Fannie buys the loans from the lenders/banks/wholesalers that made them to consumers...they then create mortgage bonds based on the flow of these loans and sell those bonds to investors to create more cash to fund new loans…eventually the bonds come due and the buyer of those bonds needs to be paid…those funds comes from selling new bonds…a circle.

The government is guaranteeing the payment of those maturing bonds and/or interest payments on them because selling new bonds has been a little slow (investor confidence).

It worked well because the markets got the ‘warm fuzzies’ started buying mortgage bonds…that reduced the rates…and is keeping cash flowing…for now.

The future requires investor confidence to continue buying mortgage bonds. Investors (each of us) are finicky…we can be fooled once…but normally not the second time.

That said…the banks/lenders/wholesalers are selling/originating only good quality loans…to use your words…real people with real income and good credit scores (traditionally the best saleable mortgage). This will keep a good flow of cash.

With stronger underwriting guidelines and Wall Street not offering CDOs and their hybrid MBS (collateral debt offerings and mortgage backed securities…where all the risk was and created the crises) it means the best buy (highest yields)…even better than some treasuries are Mortgage Bonds.

Regards,

Norm

Norm Hansen
Managing Partner
AmWest Mortgage
                                                                      
norm@amwesthomeloans.com 
212 Elks Point Road, Suite 448 /PO Box 12300                                                                      
Zephyr Cove, NV 89448                        
775-586-1130 Tel.
775-586-1140 Fax.