Mortgage orphans is a term used to describe homeowners with mortgages that no longer have a mortgage broker or loan officer due to their lending institution going out of business. There are a lot of mortgage orphans these days. The most recent deluge of orphans is a result of the IndyMac Bank takeover by the FDIC.

Last Tuesday, I attended the Contra Costa Realtors in Motion meeting at Concord Centre. IndyMac Bank was this month’s sponsor of the CCRIM. A representative of IndyMac Bank told the group – though IndyMac is leaving the traditional mortgage business, IndyMac is strong and remains a big player is certificate of deposits. I guess the upper echelons of the corporate structure weren’t sharing the depth of the troubles with their employees. This is often the case. It’s sad to see people put into these types of situations.

I ran into one of IndyMac’s former agents yesterday. He used to be part of their retail lending division in San Ramon, CA. I asked him what he was going to do and what he thought of the current situation.

He told me that he started looking for other options several months ago. He also told me that in his opinion the big banks taking over the lion’s share of the mortgage business is not good for consumers.

“The big lending institutions are top heavy with expensive level after level of management. The consumer winds up footing the bill for all of those salaries and the mortgage business does not really need or require all of that structure.”

I was also informed that there is a group trying to buy IndyMac’s former retail lending group. He did not feel that this was going to be a good thing either. My sense was because of the group involved in the takeover attempt.

Many homeowners' relationship with their lender or mortgage broker is a fleeting affair when it should be a long-term relationship. Finding a good lender or mortgage broker and consulting with them regularly like you would your financial advisor or CPA is a good thing.

If you find yourself in the position of being orphaned, pick up the phone and start the process of finding a lending professional that can help keep you abreast of what all the changes in the industry mean to you as a homeowner.

If you are see little relief in your Adjustable Rate Mortgage after the Fed interest rate cut on September 20th your loan may be in Libor. No not limbo, LIBOR – tied to the London Interbank Offered Rate.

"If Libor doesn't come down, there is no relief" for many mortgage borrowers,” says James Bianco, president of Bianco Research LLC, a market-research firm in Chicago.

One more example of the global economy. Your home loan is no longer guaranteed to be an American product.

We get many a buyer that thinks it’s all about the interest rate – whoever is offering the lowest rate, that’s the best deal……arrrgh! Not necessarily. Prepayment penalities, payment of points, rate on reARMing, etc. may be more costly than interest rates over the term of your loan.

A great deal depends on how long you plan on owning the home. If you’re of the mindset that it’s all about the interest rate take the time to talk to at least three different Certified Mortgage Specialists.

We invite comments here from mortgage brokers on this issue.

Home sellers in the San Ramon and TriValley areas are starting to experience what much of the country has been experiencing months ago – ya gotta give a little to get a lot. The East Bay has many real estate markets that have fared the housing market storm in good shape, but the continued rennovation in the lending industry is sending ripples through many of the local housing markets once thought to be above the fray.

Housing affordability for first-time buyers and tightening credit standards for all are affecting the local real estate dynamics. Many sellers are just beginning to realize – it’s the market, not the marketing.

Here are some tidbits from around the nation today that help make the point:

Theresa Boardman had this on her St. Paul Minnessota blog today: Recommendations to REALTORS® and their customers:

• Housing must go on sale. (During the boom, sellers got a premium for their properties–that bloom will be reduced in this market.)
• Prices must drop or homes taken off the market in order to reduce the high and rising inventory.
• Buyers are being realistic in their offers…it is the sellers who do not understand three things:
• Their home values increased a lot from 2000-2005.
• They are selling into a falling market so 10% less today is better than 20% less next spring.
• Selling in this market (getting less for their home) permits them to buy in this market (buying for less).

TOUGHER LENDING PRACTICES DAMPEN BUILDER CONFIDENCE – Home buyer skepticism, fueled in large part by tougher mortgage lending practices, is straining builder confidence in the single-family market, according to the recent National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

Some notes from Bankrate.com today
These are the times that try the skills of real estate professionals, says Jim Crawford, a real estate coach in Atlanta.

"It's a buyer's market without buyers," he says. "Of the top 40 markets, 36 are down. In Atlanta at this time of year, we should have a maximum of 52,000 homes for sale; we have 114,000. What's happened is, if you can't sell in Chicago, you can't buy in Atlanta. If you can't sell in Boston, you can't buy in Florida."

Here's the squeeze: Rising inventories make it difficult to set — and get — your asking price. Buyers, caught in the same predicament, are reluctant to buy, hoping prices will return to earth shortly.

Dianna Kokoszka, vice president of Mega Achievement Productivity Systems at Keller Williams Realty, says today's buyer wants money-in-pocket value, not frills and playthings. If your home is competing with nearby new construction, be prepared to offer the same or equivalent incentives as the builder.

And, similar to the down market of the late 1980s, home sellers must now compete not only with builders, but with foreclosures, thanks to all those subprime loans you've been hearing about.

"In order for a home to sell once, it has to sell twice: You have to sell it to the Realtors and then the Realtors sell it to their buyers," says Kokoszka.

And from SquareFeet in San Jose this interesting tidbit from July data: The supply of homes for sale in California now is actually greater than for the country as a whole.

 Image by Nick Buxton

We’ve written over and over again about the importance of knowing the local real estate market. There can be significant differences between neighborhoods within the same community. One neighborhood can be experiencing flat sales with appreciation increasing while another neighborhood can see increasing sales and declining values.

Look at this graph reflecting housing appreciation. Parts of the East Bay have been hit very hard – dragging down the rest of the area. But, historically we see that the East Bay supports home value increases.

This graph shows you the last two major corrections in the California housing market. Note how home values remain fairly stable even in a down market.

While the media continues to sensationalize the housing market correction, interest rate increases and the clean-up in the mortgage industry – interest rates remain at historic lows.

The subprime meltdown in the mortgage industry has received wide coverage in all media venues, including the blogosphere. California as a whole is having it’s problems, but many local real estate markets are seeing very little impact from the subprime blues.

In general, the I-680 corridor from Walnut Creek to Pleasanton is experiencing a normal market. Inventories are still in the 2 to 4 month range. The result of all of the various influences on the East Bay housing market have resulted in a “Value Conscious Market.”

Buyers know the deals are out there. They’re looking for resonable sellers who are willing to deal with the realities of a correcting market.

Home Buyers Feel the Squeeze - Lenders Embody Kindness

Mortgage lending standards are getting stricter and homebuyers are feeling the squeeze. Lenders are requiring higher FICO scores and more documentation from home buyers.

Securing a Loan Gets Tougher As Lenders Tighten Standards – Mortgage lenders are beginning to scrutinize borrowers more closely, causing some loan applicants, even those with good credit, to face higher costs and more hassles.

As the number of delinquent mortgages climbs, lenders have tightened their standards for issuing loans, including such well-publicized moves as raising minimum credit scores and cutting back on 100% financing and low-documentation loans. Now, some lenders are probing more intently would-be borrowers' finances. They are taking a tougher look at how much the property a borrower wants to buy is worth. They are peering further into clients' pasts for credit problems and requiring more in-depth reviews of borrowers who say they are self-employed. Some lenders are taking a harder stance when it comes to whose credit score a couple can use when applying for a mortgage, rather than simply allowing them to use the higher of the two scores.

If you can believe the press, compassionate lenders are coming out of their cubicles to help homeowners that are in trouble with their mortgages.

A kinder, gentler mortgage lender - More lenders are reaching out to borrowers in trouble. With foreclosures on the rise, banks are trying a gentler touch.

When homeowners default, they cost lenders pots of money, an average of $40,000 or more per home - due to brokerage fees, utility bills and other costs. Banks find they're better off getting borrowers back on the payment track than forcing them out.

So, it appears that those in trouble get a repreive while those hoping to get a home get the ruler on the knuckles.