Mortgage Broker, Real Estate Agent Discuss Bad Credit Mortgage Fallout

Across the nation, housing market insiders can agree on one thing: the subprime mortgage crisis is not going away. Here’s what a trio of experts had to say about it:
Mitch Ohlbaum is a mortgage broker in Los Angeles. He says if you want to get a decent interest rate now, you’d better have great credit and be prepared to put down a big chunk of change.

“For now, the standard is really going to be 10 percent if you want to buy something. Which in the real world’s not so bad, it’s just a little bit more difficult where we live, where everything’s a million dollars.”

Ohlbaum says a 10 percent down payment is unrealistic for many of his middle-class and working-class clients, even those with steady incomes and good credit. The result? They can’t get the California mortgage loan they need to buy in L.A. where the median home price is well above a half-million dollars.

Dan Arguelles is a real estate agent in Manhattan Beach, California. He says the restrictive lending practices mean homes in his tony area are taking longer to sell.

“Now it’s getting even tougher, that you have to state your income. It is getting a little harder to find that qualified buyer.”

The same thing is happening in New York, San Francisco and Washington D.C.

Lastly, housing market economist David Lereah says a couple months ago it was too easy to get a home loan; now it’s too hard.

“We need to be making [home mortgage loans] to families that have the financial wherewithal to buy these homes. That’s the American dream, is homeownership. And now we’re keeping families out of that dream, because we’ve overreacted to this boom-bust cycle that we find ourselves in.”

Lereah says if the credit-crunch continues, it will erode consumer confidence in high-priced real estate markets. This will make it more difficult to ever enjoy a full recovery.