More credit tightening..

Here is a list of changes that either went into effect since October 1st or going to soon go into effect:

1. Seller Funded Down Payment Assistance no longer allowed for FHA Loans - This removed one of the last widely available avenues of now down payment loans for borrowers. Effective October 1st.
2. All major private mortgage insurers no longer allow above 90% LTV - This moved the bar from 5% down to 10% for Fannie/Freddie loans. Vast majority went into effect in October or before. Last holdout goes into effect in November. This isn't nationwide but California and Florida specific.
3. Conforming Jumbo limit dropping to 625k from 729k - Effective January 1st with money so tight I think this will really affect the 800k-1,000k homes. The guidelines on super jumbos are just much tighter on borrowers and the rates are very expensive.
4. Income waivers are becoming very hard to get - Brokers were using income waivers as a backdoor stated income loan. The Fannie/Freddie underwriting engines would give waivers for documenting incomes if the borrower had a good credit score and a little down. These engines were updated this last week and income documentation waivers are now very hard to come by. It is becoming a full doc world.

I would expect the market to start to weaken even above normal seasonality in about 45 days as old loan locks are lost and new borrowers are subjected to the newer guidelines. That said the market is still a "good" one, a well priced home (at or slightly under market) in the sub $600,000 range will be gone in a week. The mortgage market is still very liquid because of the Feds actions, it is just becoming much more a vanilla loan market. I would still expect the final quarter of this year to handily beat last years 4th quarter. This has more to do with the just how historic the sales declines were last year around this time and the massive price declines that have happened since then than any strength or recovery signs in the current market.