Mortgage Woes Depress Real Estate Market

Asian stock markets rebounded strongly today on the heels of Friday's bounceback on Wall Street. The upturn is partly due to easing concerns after the fed cut a key interest rate. But will that be enough to keep U.S. housing troubles from spiraling into a full-blown economic slump? The fed's rate cut on loans to banks halted a global market slide that had lasted more than a week. But few traders are breathing a sigh of relief yet. Many on Wall Street are still in panic mode, afraid that a crisis in the lending industry could sink the stock market, deepen the housing recession, and cripple the economy. "This is starting to spread. It's starting to deepen. And investors are worried that will have a serious impact on the economy," market analyst Hugh Johnson said. "We have to take the possibility of a recession very very seriously." The problems in the mortgage industry have also had a domino effect in the real estate market. Many first-time home buyers are getting shut out of the market, and that hurts home sellers who may be forced to cut their prices. Homeowners are also having more trouble refinancing their rising adjustable-rate loans, and that's increasing the number of foreclosures. "This is the most devastating thing that ever happened to me," one homeowner said. Lenders are now demanding that customers have larger down payments, more cash reserves in the bank, more proof of income, higher credit scores, and less debt. Ray Western was supposed to move into a new house over the weekend until the mortgage company pulled the loan at the last minute. "It's not fair. I had a loan. I had a guarantee in writing," Western said. The same thing happened to Gary Cecere and Heidi Chase. "We started packing it up and getting happy about it and then Monday comes and we get this call and he says they pulled it," Cecere said. "They pulled it," Chase said. "The consumer expected to walk in here and anyone could get a loan," said Ken Perlmutter, president of Perl Mortgage Co. "That's what was happening 3-6 months ago, and the rules have changed." "Even people with excellent credit are having trouble getting a mortgage," realtor Kathleen Knorr said. Loan delinquencies and foreclosures are expected to rise steadily for at least the next six months as people with adjustable-rate mortgages continue to reset to higher rates. And more trouble in the mortgage industry is likely to mean more volatility on Wall Street.