New Mortgage Lending Lags as Banks and Mortgage Giants argue over who gets stuck with bad loans.
The Wall Street Journal reported this week, that despite record low interest rates,
fewer loans are being originated because Lenders and Mortgage Giants Freddie Mac and Fannie cannot agree to who is responsible for holding the millions of dollars in bad debt.
The role of Freddie Mac and Fannie is to purchase mortgage loans from lenders, and repacking those loans into bonds for investors. This allows lenders in turn to make more loans. The center of the dispute is who should hold the large amount of bad loans made during the boom real estate years.
The mortgage giants have been using what is know at a put-back option to return these bad loans to the original lender if there was a material mistake when the loan was sold. For example, if the original appraisal was overstated, then the original lender would be required to take the loan back.
However, Fannie and Freddie Mac have been using this provision for all loans, not just those issues during the housing boom. For example, Fannie Mae has been trying to put-back a loan issued in 2003, well before the housing crisis, which was foreclosed on in 2010. Because of all the put-backs, lenders are now paranoid, and have raised their lending standards to the point where loan origination has dropped significantly.
Treasury Secretary Timothy Geithner stated at a Senate hearing in July "Mortgage credit is tighter than it should be. And the main reason for that is because banks feel much more vulnerable now to what people call 'put-back."
Malden Real Estate Moves
Here are some of the latest Commercial Real Estate actions in Malden:
Rockland Nursery School: Steve and Carol Wishoski, owners of the Rockland Nursery School have purchased 44 Dexter Street, which is opposite the building they purchased and rehabbed at 122 Maple Street. The building at 44 Dexter is under going extensive work to get it ready for the school. Once open, it is reported that the Clifton Street facility will be sold.
Rosebud Farms: The commercial real estate site that is home to the Rosebud Farms store on Commercial Street is up for sale. No word yet as to whether they plan to stay open and lease the property back after the sale is complete.
Lincoln Studios: Lincoln Studios on Pleasant Street has listed it's space for sale in Downtown Malden. The one story commerical space is located up near City Hall. No word yet what their exact plans are.
According to the Freddie Mac survey, average mortgage rates declined for the week ending Thursday, October 4, 2012. The average 30 year mortgage declined from 3.40% to 3.36% and the average 15 year mortgage decreased from 2.737% to 2.69%.
Mortgage rates one year ago were 3.94% and 3.26% for the 30-year and 15-year fixed mortgages.
Snapshot of the Malden Real Estate Market
Source: MLS Property Information NetworkSingle Family Condo Multi Families # of Listings 50 37 33 Avg. Liv. Area Sq Ft 1,609.22 1,122.32 2,420.76 Avg. List $ 311,720 217,397 $390,388 Avg. List $/Sq Ft $201 $213 $164 Avg. Days on Market 89.96 57.35 $166.58
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