The topic I am touching on today is in regards to property values. Broward County is one of the latest counties to be put on a list that some lenders are using that indicates this is a market where values are "Significantly Depreciating". Broward joins the following Florida counties on this list:

Brevard, Charlotte, Citrus, Collier, Escambia, Hernando, Hillsboro, Indian River, Lee, Manatee, Martin, Monroe, Okaloosa, Palm Beach, Pasco, Pinellas, Santa Rosa, Sarasota, St. Lucie, and Volusia

What does this mean to homeowners here?

Lenders base all of their lending practices on some basic items, one of which is the value of the collateral (your house) vs the amount borrowed against it. This is known in LoanSpeak as your LTV (Loan -To-Value). Contrary to popular belief, the property does not simply have to appraise for what you are wanting to borrow for you to get approved. There are entirely different approval rules depending on that LTV percentage. If you are at 100% LTV - this means you are looking for a loan for the same amount of money as the property is worth. This was getting very commonplace before the massive changes and fallout in the mortgage business this year. Traditionally this was tough to get, because the lender always should be looking at the worst-case scenario - you may not pay them back in a timely fashion. In this worse-case scenario they would have to foreclose on the property, and then sell it - a business they do not want to be in. Lenders really want to loan the money and get back regular monthly payments as agreed upon, not take back properties with equity in them, even a lot of equity!

Back on topic - the lower your LTV the more likely you may get a loan. While there are still 100% financing programs available (we have these) it is much more difficult to come by that was last year. As you try to borrow less the guidelines relax. So someone that may not be able to obtain a 100% loan will have a better shot at a 95% or 90% or 80% loan. But there are circumstances where the most someone can borrow is 65% of the value of the property (current loan is in default). And there is going to be a maximum LTV that people can get. Now - the declining markets "tag" comes into play here - what lenders are doing is reducing the maximum LTV% that you can get if your property is in one of these counties. This is especially true if you are a self employed person and need to use a No Income Verification Program.

What this does, in effect is really hurt some peoples chances right now of getting a loan that might better their situation. If the maximum LTV they qualified for considering their credit and income situation was 80%, they will only be lent 75% perhaps just because their property is in one of these counties! Not only are homeowners having to contend with the property value declining, but they are reducing it even further for some borrowers! The danger this represents is that with all of the foreclosures that are hitting the market, things are likely to get worse in the short term. These foreclosures can really hurt the comparable sales in a neighborhood - thereby reducing your value on paper right now. Long term the market will rebound, but in the immediate future (next 12 months) things are uncertain. If you have an ARM loan that is set to adjust in the next 12 months it would be very wise to look at your options right now if you are concerned about what your payment might become once the loan adjusts.

It is possible that waiting until later, in the short term, could seriously limit the kind of mortgage that you can get later - either due to further mortgage industry difficulties, or declining values in your neighborhood. If you don't do something now you are putting the control of your future options in the hands of the people in your neighborhood who currently have their homes on the market. If someone decides they just want to dump their property, or they can't pay and get foreclosed on, this could hurt your chances of changing loans in the future.

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