No mudslides this week, but pullbacks on mortgage opportunities fall on the great State of California.

 

Major lenders are no longer allowing interest only payments on mortgages, thus the monthly payment will include principle and interest. This way, borrowers have to pay down the loan and build up equity instead of owing the full principle for the first ten years- or until the house is taken away in foreclosure. I believe the banks never should have offered this option to common folk, knowing full well the average human is greedy and never would put a dime towards principle if they were not forced to. Now- they are forced to!

 

Financing will no longer be allowed on second homes. Perhaps Brittney Spears will have to come up with all cash when she buys her condo in San Francisco (only will be staying there while shopping-not visiting museums).

 

There will no longer be a benefit for putting down a large deposit. Banks were giving better deals for folks that put down 20%, 30% or more. There was also a plus for doing refinancing and leaving al lot of equity in the house. This was the lender’s cushion in case of default. Now, the banks are offering the same deal for 80% loan to value or less. So, why bother putting down more money when you can keep it under your mattress- just in case.

 

While Big Bank CEO’s are crying on Capitol Hill, they are secretly screwing borrowers on the West Coast.

 

Dale Siegel