From interest rate fluctuations to historic new legislation surrounding lending guidelines and tax credits, 2009 may go down as a year in which major players within our economy began to renew transparency and trust in our nation’s financial system.

The lending industry saw historically low interest rates continue.  The stock market rebounded, homeowners refinanced loans in large numbers, and first time home buyers took advantage of the historic $8,000 tax credit.

For specific mortgage products, we saw dips in the 30-year fixed and ARM products: but because most banks weren’t lending, the only viable vehicles were via government-sponsored agencies such as Fannie Mae, Freddie Mac and FHA.  And because these government-sponsored agencies lend money on conforming products, lenders in the jumbo market incorporated tighter guidelines, shrinking the market for non-conforming loans.

As the year progressed, though, the jumbo market gained steam.  Borrowers shopping for non-conforming loans still need to bring 20% down - more than in years past, but this represents a movement towards a more normalized long-term view of home financing.

Our industry also took important steps to self-correct. Loans with borrowers carrying very high debt-to-income ratios (upwards of 65-70%) are now no longer available.  There are no more “stated income” mortgage products.  Few 100% financing products are on the market.  Credit guidelines have also tightened.While in the past, borrowers could obtain a mortgage with a credit score of 580,  loans carrying credit scores under 640 are now often difficult to underwrite. A score of 720+ yields the strongest rate pricing.

The first-time home buyer tax credit of up to $8,000 invited a new sphere of potential home buyers who have jobs, have good credit, but lack the savings to make a significant down payment.  This incentive, in addition to low rates, will help to keep the market moving.

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