TheStreet.com's Jim Cramer says a guarantor's map of newly restricted markets is shocking in its scope.How bad is it out there in housing? It's difficult to say, because we know that once you start recognizing the problem, they say that you are nearing a solution. But one of our terrific readers sent me this note over the weekend, which is a reality check to everything, acknowledging the cordoning off of whole areas around the country for mortgages.
Who can do such a thing? The buyers? The sellers? The realtors? No, the personal mortgage insurers who were there to protect the banks from deadbeats but are themselves under siege.
Last week they sent out this memo. When you overlay this list with the grades that Bob Toll gave the markets he is in last week on the Toll Brothers (NYSE: TOL) (Cramer's Take) call, you know that we aren't done lowering rates if we intend to beat this problem.
There are several components to affordability, including the declining house price, mortgage money availability, household income and the price of the mortgage. We've got declining prices and steady household income -- so far -- but rates are still too high to move the needle on the 30-year fixed. (And yes, I still believe the rate would go down on a cut.) But this memo cuts to the availability of funds in the areas that are most needed. Without still-lower rates we will not be able to reduce the overhang in these markets, and you can expect that things will only get worse, not better.
Of course, price could cure everything, and perhaps that's the solution the Fed wants. Price, however, comes with a cost, and that cost is default, bankruptcy, foreclosure on the part of those already in homes, NOT just losses from the homebuilders trying to sell them.
Here's the memo, from the Mortgage Guaranty Insurance Company, with parenthetical annotations from the realtor:
February 6, 2008
Dear Valued Customer:
As a result of our ongoing evaluation of market conditions and loan performance, we are making a number of changes to our base underwriting guidelines and have created a new set of guidelines for areas exhibiting market weaknesses. The following underwriting guideline changes are effective for mortgage insurance applications received by MGIC on or after March 3, 2008.
(Then it goes on to break down underwriting guidelines. FICO is very important...and it better be above 660! And if the appraiser says that the property is in a declining market [see list below], then many lenders wouldn't touch it, as these loans right now can't sell on the secondary market.)
Here is the list of restricted markets:
- Arizona -- Entire State
- California -- Entire State
- Florida -- Entire State
- Nevada -- Entire State
- Denver-Aurora, CO
- Greeley, CO
- Washington-Arlington-Alexandria, DC-VA-MD-WV
- Atlanta-Sandy Springs-Marietta. GA
- Honolulu, HI
- Coeur d'Alene, ID
- Chicago-Naperville-Joliet, IL
- Baltimore-Towson, MD
- Bethesda-Frederick-Gaithersburg, MD
- Hagerstown-Martinsburg, MD-WV
- Barnstable Town, MA
- Boston-Quincy, MA
- Worcester, MA
- Detroit-Livonia-Dearborn, MI
- Minneapolis-St. Paul-Bloomington, MN-WI
- Atlantic City-Hammonton, NJ
- Edison-New Brunswick, NJ
- Newark-Union, NJ
- Ocean City, NJ
- Nassau-Suffolk, NY
- New York-White Plains-Wayne, NY-NJ
- Poughkeepsie-Newburgh-Middletown, NY
- Portland-Vancouver-Beaverton, OR-WA
- Virginia Beach-Norfolk-Newport News, VA-NC
- Winchester, VA
- Tacoma, WA
RELATED LINKS:
Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in the stocks mentioned.











Reader Comments (Page 1 of 3)
2-11-2008 @ 11:49AM
gumbo koontz said...
Jim Cramer
I am trying to make money on other stocks but couldnt because Big Oil sucks up all the loose dollars around everyday from sunrise to sunset!!!
We can just carpool , call our insurance agents and say to them that we are driving less mileage because of carpooling and get discount on premiums. We will save a lot of money to keep up with our sub prime mortgages.
Americans are dinosuars and unable to adapt to changes in our economy. Yes we are stupid in our economy!!! Very s t u p i d !!!!! !!!!! !!!!! Soggy assed stupid Americans we are!!
2-11-2008 @ 11:53AM
gumbo koontz said...
Jim Cramer
You are barking up and down on those numbers. Our economy is nto run by our stock market....Our economy is run by freedom of choices... Americans are perfectly free to screw Big Oil and bridge toll booth agents!! Lets begin carpooling and start savin' dollars and savin' our houses right now!!!
You can step back from your Mad Money show offs and get into the under currents of issues. You can stay on the top of things the whole time. We have sewage pipes under our cities and we have to keep it cleared up or we will get clogged up, right? This is the same thing with stock market. There is sewage pipes under stock market and it is already clogged up and retch of shits and piss and whatnots,, get to work don your deep boots and push the shits out the oultets now...
2-11-2008 @ 7:13PM
Fred said...
Not sure how your source concludes that the DC and suburban VA/MD areas were "undesirable"...I moved from there a couple of years ago and it was/is a very pricey market.
2-23-2008 @ 11:45PM
Leslie said...
Fred, when was the last time you visited the area?
I live in the area.
There are for sale signs everywhere.
Thanks for your insight, Jim.
2-13-2008 @ 1:10PM
cmonterroza said...
I've never heard such dumb comments. You guys have no idea the way our financial system works. It's time you learned. Check out the blog to learn what the deal is with subprime:
www.subprimeinsight.com
The equity markets are a small bit of our financial landscape and perform well when capital is not restricted. However, it is today. Furthermore, the BIGGER more efficient markets are collapsing. Those effect the economy. The stock market then responds.
2-21-2008 @ 7:04AM
Mike said...
Cramer is right about housing. Go buy a condo in Miami. How much should you pay for it? Trust your broker to tell you how much its worth. He'll TELL you (sell you). Housing markets are oversupplied. That means prices are falling. Why buy at $525,000 when the price was $600,000 a year ago and the prices likely will keep declining? Banks will move their inventories by "quick sale" pricing (discounting enough to sell within a short period). Those foreclosures drag the market down until the inventories dry up? Some markets have years of inventory at this buying pace. Do the numbers. The cost of food, oil, etc. aren't cheaper or operating the same. How do you fix stag-flation?
2-27-2008 @ 4:01PM
Bill B said...
There is another reason why housing is so stagnant in FL - property taxes are so inequitable a person has to be literally out of their mind to buy. An amendment to the constitution called Save Our Homes ostensibly protects "longtime" residents from being taxed out of their homes. The result for others is a disaster – part time residents who have lived here for years, not using schools and only half the services of full time residents are paying 400% more I property taxes than their full time neighbor with the same house. The same is happening to ANY new buyer in FL, and renters (5 million) get the shaft no matter how long they’ve lived here. Same thing for the elderly living in senior rentals or ALF. Want to buy in FL? The welcome mat is out for wealthy foreigners. Anyone else better think about a second job before buying to subsidize their neighbor’s share of realistic property tax.
2-21-2008 @ 9:40AM
dave5251 said...
THe whole thing is greed bank are not loosing money it just profit they thought they so have made of people buying home they want 2half time the loan pay back that nut !!!!!!!!!!!!!!! all we have to do set set mortgage and max 4% and life would go on it came a time that they HAVE MAX OUT there PROFIT that people can pay them and far as EXXON they run the GOVT if they cant make 500% profit they stop making gas FACT and we over in the sandbox getting kill for them HUM!!!!!!!!!!!!!!!! just so a few can get rich
2-21-2008 @ 9:40AM
dave5251 said...
THe whole thing is greed bank are not loosing money it just profit they thought they so have made of people buying home they want 2half time the loan pay back that nut !!!!!!!!!!!!!!! all we have to do set set mortgage and max 4% and life would go on it came a time that they HAVE MAX OUT there PROFIT that people can pay them and far as EXXON they run the GOVT if they cant make 500% profit they stop making gas FACT and we over in the sandbox getting kill for them HUM!!!!!!!!!!!!!!!! just so a few can get rich
2-21-2008 @ 9:48AM
scott said...
the higher the highs the lower the lows. This country has been on a equity induced financial run since 02 and the pain begins.
2-21-2008 @ 10:01AM
auntrachel said...
Yes, that's what this country has become, people buying stuff they don't need with money they don't have. Just go to any mall or Christmas Tree Shop on a weekend and people are stuffing their baskets with junk and using credit to pay for it. The credit cards get run up and so they take equity out of their house to pay for it and go out and charge up the cards again. To make matters worse we've also become a society of "it's not my fault" not taking responsibility for our actions and ready to point the finger elsewhere when our decisions get us into trouble. Yes, some people did not understand what they were getting into with their mortgage product but with all the disclosure we're required to do before any money is loaned I think many, many people chose to ignore the possible downside.
2-21-2008 @ 10:04AM
De'bora said...
The USA is in a terrible state but let's put the blame where it goes (people) GREED, SELFISHNESS, and IGNORANCE on all people's part. First of all people want bigger or better instead of living with what’s affordable. Also educate yourself before purchasing anything. Secondly persecute those who are misleading the people they are fraudulent they need to go to jail, lose their jobs and their licenses. Thirdly California needs rent control it’s a shame working people can’t afford an apartment without a roommate. Fourth American citizens haven't seen the worst yet until we as a people change our wicked ways from hate, selfishness, and greed. Change begins with self, loving yourself and others as you love yourself and the world would be a better place for all. Finally there is no one man or woman (black or white) who can save this world so stop relying wholly on a president they can't solve all the worlds problems look at all the past ones we've had (white males) so leave Obama alone he can't do no worst then past presidents already have. Just remember change begins with one self. Signed sick and tired of foolishness.
2-21-2008 @ 10:47AM
R~ said...
FICO, what a scam.... I just proved that a company frauded me, saying I owed them money I not only already paid them prior to it going to collections, but that my health insurance was fully responible to begin with and pay... Doesn't change the fact that while I was trying to prove my innocense, my score went from 7, to low 5s... now after 20 years in our business, 6 years in our home... we are finally pushed out. WE DON'T have bad credit, but tell FAIR ISSAC that. The Feds can have their new found HUD homes that basically steal from us, those people don't need to worry about FICO, to them it's free. B of A, and Countrywide, are also scammers. They get bailed out, and after 20 years with them reject our small business loan, lol. Make room for more freaks in California, those who were born here are being pushed aside to widen the room for more free housing for the Spanish speaking population, and other illegals. Good for them, let them carry our cross for awhile. FICO, what a joke, they can lower your score in error but can't replace it? LOL, give it up to the machine, she's a beast, lol. WOW
2-21-2008 @ 11:00AM
Robin said...
I called all 3 credit unions, FICO, SS, FDC, BBB even the Attorney General, None of them had any information on how to get this FRAUD removed from my FICO score, those I had proof from 3 companies which supported the fact the collection that appeared unpaid, that caused my FICO to lower from 7 to 5 over the past 6 months. HOW is this? These same computer programs they say have a mind of their own are also running your life, tallying your VOTES, (another joke), I say use the 2nd Amendment & shoot these F-in computers that have overthrown our Goverenment & start over, lol. HAIL to the age of the Big Computer excuse, heeeee. Oh & F people like this greek who can explain away the reasons why it's okay to lose your ID, and or credit inside a data base that no one seems to be able to correct the glitch in. You all have a good day, and don't let the machine eat your Cheetos or babysit yer kids, lol Yaaaaa. BIG HUGS
2-21-2008 @ 12:05PM
David Del Rossi said...
Thanks for you insight Jim. I own property im Las Vegas. Rental Income.
David
2-21-2008 @ 12:12PM
Tom Roberts said...
Republicans cause resession! Every time they get in office they do it. Or within a year of leaving office because of thier political finance desicions.
2-21-2008 @ 1:07PM
tom said...
all americans are slaves to the debt holders. this country is in too much debt, and the mortgage insurers understand this. why loan money to someone who cant pay it back? our country owes trillions of dollars to china through US govt bonds. we are going bankrupt and we need to stop giving away billions of dollars to foreign countries and to people in our own country. we give billions to Africa for AIDS while our great-grand-kids will be born as a slave to China as debtors.
2-21-2008 @ 1:33PM
Justin said...
Make your mortgage payment. How bout that? Stop blaming others. Don't buy over your head and make your payments. Do this and there are no problems.
2-21-2008 @ 2:15PM
Brooke said...
I dont understand why some people make such ridiculous comments. First learn the facts and then make an informed decision. I absolutely undoubtedly agree with "auntRachel", who understands that we all spend way too much and then complain that we pay to much at the pump! Please! You people buy coach pocketbooks and dolci & gabana jeans and starbucks coffee every other day! You dont know how to save a dollar for your life!! If we all stopped buying things we dont have money for ...the debt, the bad credit, the inability to buy a house, or a decent education for your kids...might just go away! I also agree with R~, who realizes that we are giving everything to the non US citizens...the immigrants...the illegals.... We give the blacks...the mexicans and the spanish speaking people whatever it is they complain of!!! Maybe if they stopped having five babies by the age of 17 they might have more money to educate them. Forget about the hardworking US citizens in OUR OWN COUNTRY! How come all the scholarships in my college handbook were for the Black American or the Black Basketball Team...where was the White American US citizen scholarship who's been working in this country since 14 years of age!?! We need EQUALITY FOR ALL! NOT PREFERENCE! Now, when it comes to a president...as a white American I can easily say....this Obama character will just make this country more divided...the blacks will go from having the back of the college handbook to the entire thing! As you heard Mrs. Obama say.."this is the first time I'm proud of my country"....thats funny...wasn't she a harvard graduate?...who gave you that education?...Africa? or the United States of America!!!!! I wonder how she paid for college? oh,...that's right! They have the section in the back of the handbook for all the black Americans! Was Africa footing that bill? or the United States of America!!!!! This country should be ashamed that you are on it's podium able to voice your foolish opinions on others who are more wise than you. Obama has a dream like Dr. King, whom he so often refers to. Remember! #1 you are no Dr. King and #2 Dr. King was not a president of the United States! This job is wee bit higher for those of you that do not know. It is a seat to be filled by someone who represents our AMERICAN BORN values and morals AND STANDARDS! Not homosexuality or drag queens or the vulgar crime-filled racist black neighborhoods! Our Founding Fathers explained what is good for mankind with rules and boundaries and it is only in a 19th century world of selfishness and greed that we dare to ruin such a blessing! Think as they did...before you speak!
2-23-2008 @ 10:08PM
rick said...
Ditto to Brooke's comments. Absolutely hit the nail on the head. Obama's rise to popularity was from a man by the name Osama the most popular name in the world and the most wanted after 9/11. Imagine the comments of Jesse Jackson and Al Sharpton the first time the House or Senate disapproves of leglislation from the, Barack"Hussein"Obama administration.