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Mortgage companies are waking up to the fact that their is not just one mortgage market out there. Instead of making loans requirements based solely upon the lenders ability to pay, they are now looking at the local market that the home is in and adding additional requirements to ensuring the loans can be paid back.

Countrywide Bank sent mortgage brokers a list on Jan. 25 that categorized hundreds of counties as soft markets with rankings from 1 to 5, in ascending order of perceived risk. In areas rated in Categories 4 and 5 — roughly 100 counties in metropolitan areas nationwide — Countrywide said it would now require larger down payments from most applicants.

If a loan program previously allowed a minimum 5% down payment, applicants will now be required to come up with double that amount — 10% — to qualify. via Los Angeles Times.

There is word out there that some are afraid this is redlining, the practice of making mortgages harder to get for minority neighborhoods, but I think this is the opposite end of the equation. Some regions are overpriced and to ask borrowers to come up with a higher down payment makes a great deal of sense. Everyone in a risky area is now asked to step up to the plate and share the risk in the loan.

We have learned that a lender with a 100 percent loan is not going to have a very good chance of being paid back in a declining market. The lenders have figured that out and by making the homeowner a partner in the success of the loan process they have a much better chance of being paid back.

It is not rocket science.

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