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The continued decline in home values has lenders seeking to raise more capital.

 

The rapid decline in home values and non existent secondary market for mortgage securities has almost everyone in the mortgage industry looking for more capital.

Home values could drop another ten percent in the next year or so, and while there are certain real estate markets that have shown signs of improvement, the overall sentiment is that the real estate markets need at least another twelve months to turn the corner. This has left the larges financial institutions including Fannie Mae and Freddie Mac searching for additional capital. These companies operate under a business model were they are leveraging their assets to pledge for mortgage securities. As the value of their investments has declined, they are forced to pledge additional capital to try to real their portfolios.

Find bank, the larges independent wholesale mortgage company and loan servicer has announced they will no longer be funding conventional mortgage loans. The company has been unsuccessful in its attempt to raise capital and has struggled with writedowns to its balance sheet since the fall of 2008. The company will focus its attention to it's reverse mortgage and servicing operations and may re enter the mortgage field once the real estate market rebounds.

Following the news from the sidelines one is left to wonder how many more companies are likely to fail and if this trend continues does the economy have the capacity to pull through this as additional pressures from the energy markets continue to increase the financial strain on all home owners.

7-8 2008 ? LoanNetwork.com

 

 

 

 

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