When I spoke with Sean Barry on the morning of October 6, the stock market had just plunged 700 points, despite a $700 billion government “rescue” package that had been rushed through Congress three days earlier. Suddenly a seismic shift had transformed the entire U.S. and European financial landscape, as one bank after another was bailed out, acquired at fire-sale prices, or nationalized. And CNBC was reporting that Wells Fargo (where Barry works as a home mortgage consultant) was challenging Citibank for the acquisition of Wachovia.  

It was an interesting time for a meaningful conversation.  

I also talked with Richard Faust, vice president of retail mortgage sales at Bank of America, and Todd Pianin, president of Samuel Scott Financial Group. Each had poignant things to say about the current state of mortgage lending in San Diego’s North County coastal real estate market.

When asked how much harder it has become to get a mortgage or refinance a home loan, Faust replied, “Sometimes the media makes it sound like no one can get a loan at all. Although it’s a lot more challenging these days, we’re getting a lot of loans through. The good news is that interest rates are still historically low, and people can still qualify if they have an acceptable debt-to-income ratio, a substantial down payment, good credit, and solid reserves. For a residential purchase, you should prepare your documentation, meet with your mortgage banker, and get pre-approved. That also gives you more leverage with the seller when you make an offer.” 

Multimillion-dollar “super-jumbo” loans that require a down payment of 30 or even 50 percent may take a little longer to process, said Faust, but he reiterates that rates are still attractive. “Now more than ever, it’s important to choose a competent team and a sound financial institution.” 

These institutions are among a handful of the “last men standing” in the mortgage lending business. So I asked Barry how that is changing the market for him and his clients.

“For the most part, our bank has steered clear of the sub-prime mortgage crisis, and focused on building relationships with our customers,” Barry replied. “Depending on the balance in their accounts here, we can offer them reduced interest rates or possibly even ‘non-salable’ loans that are originated and held by us.”  

But there’s no question that everyone is feeling the pinch, he said, and people who haven’t purchased or refinanced in the past year may be in for a surprise. “They need to reset their expectations and prepare for a more painful process, with more documentation and lower loan-to-value ratios.”

Some builders and home sellers are even offering to “buy down” the loan to help buyers qualify for the purchase. “In certain cases, that’s better than reducing the selling price,” noted Barry.

With Pianin, I addressed that he works with a wide range of clients, from first-time homebuyers to “high net worth” individuals. I asked him how he counsels and services them differently.

“We’re an independent broker and banker with a strong balance sheet,” Pianin replied. “That’s what makes us different, along with an offering of almost 200 different mortgage products.”  

There are several new and important changes in today’s mortgage market, said Pianin. For example, the limit for conforming loans in San Diego was recently raised from $417,000 to $697,000, but that will fall back to $628,000 on December 31.

In addition to more conventional 30-year-fixed and adjustable-rate mortgages, Samuel Scott Financial Group offers options that may be harder to find today. For example, said Pianin, there are still instances where “stated income” mortgages are appropriate (for instance, a recent divorcee who has a guaranteed settlement, but no documentation of previous income).

New reverse mortgage products may help people who own second homes and investment properties to free up more of those assets. Higher FHA and VA loan limits are making that option more attractive as well.  

On the subject of rental properties, he noted that, “You can get good money on your rentals now, but if you’re moving up into a new home and renting out your current home, you may need to provide a longer history of rental income.”

In short, nothing is easy in today’s real estate market, but it’s not impossible, either.   CAROLE BRUMMAGE