03/05/2007

Sub-Prime Time

Hello:

Last Tuesday, Freddie Mac, the government chartered mortgage finance group, announced that it would no longer buy several types of repackaged sub-prime mortgages, including "stated income" mortgages, for which minimal verification of a borrower's income is required. Most sub-prime mortgages were issued between 2001 and 2006, with the bulk being issued in the past few years.

On Friday, one major sub-prime lender announced it would quit the business while another revealed that it was under federal investigation. That same day, Congress proposed tighter standards for mortgages including full documentation of a borrower's income. These events may cause lenders to issue fewer mortgages on the lower end of the real estate market. Much of the real estate market is supported by people moving up the real estate food chain. These events may lead to a greater softening in non-luxury real estate should job growth falter.

We will be watching the jobs report on Friday.

Are your donors taking their required minimum distributions early this year? Perhaps they would like some of that income to go toward your organization's mission.

Terri G. Millson, CIMA, CIMC President

Ray Dicius, CSA, GEPC LPL Branch Manager