Florida Mortgage Mess Makes Buying Complicated
If you’re in the market for a Florida mortgage these days, consider: you’d better have good credit and be willing to come up with a substantial down payment on your dream home.
As world financial markets reel from a spreading credit crisis sparked by the meltdown of subprime loans and liquidity problems at lenders such as Countrywide Financial - the largest mortgage lender in the nation and Miami-Dade County - South Florida housing market lenders are suffering, as well.
For now, local lenders are avoiding exotic loans that cropped up during the real estate boom and are returning to more traditional and stricter lending practices. Quickly disappearing are Florida mortgage loans that allow buyers to finance the entire purchase price of a home or make very low payments upfront with large balloon payments in a few years.
Miami-based BankUnited, which has 83 branches in Florida, is looking for bigger cash down payments for mortgage seekers and wants to see slightly higher credit scores, indicating borrowers have a history of paying their loans in a timely manner.
”Lenders are definitely demanding better credit scores, and they’re stricter with appraisers” to avoid inflated home values, said Ines Hegedus-Garcia, a Realtor in Miami Shores.
Hegedus-Garcia said a few local banks remain willing to lend to foreign buyers, but they are demanding larger down payments as well.
It could also become harder to sell moderately expensive homes - those between $500,000 and $1 million - or to get a so-called jumbo mortgage exceeding $417,000, some Florida mortgage brokers said.
NERVOUS LENDERS
Lenders have pulled back from these large loans if they exceed the threshold for purchases set by the government-sponsored entities Fannie Mae and Freddie Mac.
”We are seeing a rolling credit crunch,” said Kenneth Thomas, a Miami-based economist and banking analyst. ”Money is still out there, but [banks are] going to be requiring a lot more” to get loans done.
Some banks, for example, are demanding that borrowers escrow funds for taxes and insurance premiums along with their monthly mortgage loan payments. Such escrow accounts were sometimes optional during the boom years.
But now bankers said some recent home buyers are having as much trouble paying high property taxes and insurance premiums as their Florida mortgages.
Washington Mutual, a major lender in the South Florida market, tightened its mortgage standards last month. It now requires full income documentation as well as escrow accounts for taxes and insurance. The bank will no longer do subprime adjustable-rate mortgages with initial fixed terms of less than five years.
Carlos Fernandez-Guzman, senior executive vice president of Neighborhood Banking for BankUnited, said the bank has reacted to the changing lending environment by requiring 20 percent down payments as well as escrow accounts.
SOURCE: The Miami Herald
