Mortgage bankers are eagerly going back to basics before Congress makes them. At the annual convention of the Mortgage Bankers Association, or MBA, the most oft-spoken phrase was “back to basics.” What’s the hottest mortgage product today, Doug Duncan? “The 30-year fixed-rate mortgage,” Duncan, chief economist for the MBA, said with a tight smile. “It’s pretty much anything that’s fixed rate and conforming.”

In other words, the home loan du jour conforms to standards set by mortgage giants Fannie Mae and Freddie Mac: It isn’t a jumbo (a mortgage for more than $417,000), isn’t subprime (for a borrower with iffy credit), and doesn’t have an adjustable rate. Preferably, the borrower totes a good-size down payment (if buying) or sports serious equity (if refinancing).

Foreclosures are surging as homeowners fall behind on their mortgage payments and then discover that they owe more than their homes are worth. In response, lenders have pulled back. Subprime loans are drying up, more borrowers are asked to document their incomes, many lenders require bigger down payments than they used to, and jumbo loans are harder to get and have higher rates.

Mitch Ohlbaum, president of Legend Mortgage in Los Angeles, said: “Twelve months ago, it was sort of ‘anything goes.’ The rules were slim to none. Everyone was coming out with more aggressive deals every day.” And now? “You will see a return to basics,” Ohlbaum said. Mortgage insurance already is making a comeback, and he expects to see more carrybacks, in which the seller lends some of the money. In addition, more people will make down payments with money given by their families.

via: PMZ Home Loans