Surrounded by Ruins, Mortgage Market Remains Intact

· Home prices -- pushed by foreclosures and short sales -- have rolled back to 2003 and 2004 levels or lower in many of the former boom markets. As a result, growing numbers of buyers are coming off the sidelines, making offers and writing contracts. The pending home sales index jumped by 7.4 percent based on purchase contracts signed in August, according to the National Association of Realtors. The heaviest increases -- pointing to higher closed sales in the coming two to three months -- were in California, Florida, Nevada and the Washington metropolitan area.

Housing and mortgage leaders say consumer worries about the stock market have obscured positive developments in real estate, where pricing pain and downsizing have been facts of life for two and a half years.

David G. Kittle, president and chief executive of Principle Wholesale Lending and incoming chairman of the Mortgage Bankers Association, said "the mortgage market has never shut down" despite the global financial crisis.

Money is "clearly available as long as you can qualify for it," with at least a modest down payment and decent credit history.

Matt Vernon, a national retail mortgage sales executive for Bank of America, said, "we've got more than enough liquidity" to handle mortgage demand. "We are open for business." Most of the bank's production is now funded through the FHA, Fannie and Freddie.

On the front lines, mortgage company owner Jeff Lipes, president of Family Choice Mortgage near Hartford, Conn., said, "I don't think consumers really know how free-flowing capital is right now in the residential mortgage market. There are no shortages, no breakdowns. People ought to be aware of that."

Bottom line: Scary as the news has been about stocks and banks, this is not the case for mortgages. Besides shopping at large national lenders, check in with local banks and credit unions that may be originating loans for their own portfolios -- not for Fannie, Freddie or the FHA. Many of them are healthy, have plenty of cash to lend, and may be surprisingly competitive on terms and rates compared with the big boys.

Kenneth R. Harney's e-mail address isKenHarney@earthlink.net.