Friday, January 2, 2009

Ventura County October 2008 Loan to Value chart

(click to enlarge)

This is the October 2008 Loan to Value chart for Ventura County. Here is a summary of what the chart is telling us from last months post on the topic:

The left axis represents the purchase price of a home and the bottom axis represents the LTV of the loans on the homes at purchase. So a dot at $300,000 and 80 LTV would mean that a borrower put $60,000 dollars down on a $300,000 home and the loans on the home total $240,000. The higher the LTV the more aggressive the loan is considered to be. By click on the graphic you will notice the almost solid red line at around 97% LTV. This represents FHA singular dominance in the aggressive lending arena. The shaded blue area represents where private mortgage insurance is bring eliminated for conforming loans (Loans under $417,000). The shaded green area represents where private mortgage insurance is being eliminated for "Jumbo conforming" loans (those under the jumbo conforming limit which was $729k and is being lowered to $598k January 1st, 2009). In these two shaded areas the blue dots (conventional) should disappear by early 2009 and only red dots (FHA) should remain. The pink line represents the old jumbo conforming limit and the green line represents the new jumbo conforming limit. The loans in between these two lines will most likely not be made after January 1st. Or if they are made they will be made at much higher rates than those under the limits shown.

I should also note that October 1st 2008 was the deadline for locking Seller Funded Down Payment Assistance loans for FHA. This was the last major easily available source of 100% financing. While I think FHA will continue its significant presence for a long time the requirement of even a mere 3.5% down coming from the borrower will have a dampening effect on the market. Lower prices and lowered expectations (buying less house) by borrowers with little down payment will be the result of this change. With the jumbo conforming limit dropping, slow economy and lack of move up buyers being generated in this market means that it is the higher end turn to experience the brunt of the depreciation in 2009. The low end will still fall of course but we could see the bottom end dropping 15% while the top end drops 25% as an example of what I think could go on this year. The desire to purchase high end properties is always there, what isn't there right now is the ability to do so.


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