How The "Declining Markets" Designation Is The 2008 Equivalent Of 125% Home Loans

Using mash-up software, the graphic depicts Countrywide Home Loan's "declining markets" against a map of the country.  The brighter the "spot", the more that housing values are expected to fall in that locale.

It's no wonder that home appraisals are under tremendous scrutiny lately -- many parts of the country are considered "at-risk".

The graphic is also another representation of the same theme we've been hashing out lately: Getting approved for a home loan is more difficult for even the most qualified mortgage applicant.

It's not just the person that has to be approved by a lender now.  It's the home, too.

Homes in declining markets are subject to all of the following:

• Adjustments to maximum loan-to-value limits
• Added fees from "field appraisals"
• Longer underwriting times

In addition, because Fannie Mae's risk-based fees are based on loan-to-value, closing costs can be higher in declining markets, too.

Now, in the interest of fairness, let's remember that lenders play both sides of the story; the current reaction to declining markets is the polar opposite of how lenders behaved during the booming housing market earlier this decade.

Some mortgage guidelines allowed 125% loans against a home's value then because property values were rapidly increasing.  Lenders didn't mind a little "excess lending" then and today they just happen to be on the other side of the spectrum.

We recently talked about how changing mortgage guidelines are impacting Americans and this image is a terrific complement.