Surrounded by Ruins, Mortgage Market Remains Intact

Everybody knows how severe and painful the global financial breakdown has been, with banks unwilling to lend even to other banks. But what about mortgages and real estate? Can you still get a home loan with less than 20 percent or 30 percent down? Or with a credit score below 720?

Absolutely. It would be a big stretch to label housing the sunny side of the market at the moment, but there's a lot more light there than in most other financial sectors. Consider:

· There is no shortage of money available for home mortgages, no freezing of credit to purchase or refinance a house. Why? Because the American mortgage market effectively has been federalized -- at least for the time being.

More than 90 percent of new loans now are being made through the Federal Housing Administration insurance program, plus Fannie Mae and Freddie Mac. The FHA is owned by the federal government, and Fannie and Freddie are operating under federal conservatorship. All three have unfettered access to global capital markets at rock-bottom costs because their borrowings are fully guaranteed by the Treasury. Ginnie Mae, which is the FHA's pipeline to the bond market, recorded an all-time high of $29 billion in new mortgage-backed securities issued in August.

· Loan terms and credit underwriting standards have been toughened up, but you can still put down 3 percent (3.5 percent after Jan. 1) on an FHA-insured mortgage and 5 percent on certain Fannie Mae and Freddie Mac loan programs with private mortgage insurance. The FHA's credit standards are generous and forgiving -- the agency exists to help people with less-than-spotless credit histories. Fannie Mae and Freddie Mac have raised their credit score requirements over the past year, but buyers and refinancers with scores in the upper 600s can still qualify for loans carrying reasonable rates and fees.

· Despite the global financial system's quakes, mortgage rates remain low by historical standards. According to Freddie Mac, 30-year rates this week stood at 6.46 percent.

· Maximum loan amounts through the FHA, Fannie and Freddie in high-cost markets on the West and East coasts continue to be $729,750 through December. In January, the high-cost maximum is projected to dip to approximately $625,000.