You can qualify a monkey to buy a house...

(SFGATE) "More than half of the people who bought Bay Area homes in 2005 and 2006 are under water, owing more than their home is worth. Of people who bought in 2007, there are 41.1 percent who are under water."

Sonoma County Owner Equity Chart

"Investors Trust Mortgage, once the largest privately held mortgage broker on the North Coast, has dramatically downsized its operations in the face of a dormant housing market and crippling credit crunch."

"The Santa Rosa-based company, which a few years ago had 27 offices, 200 employees and $33 million in annual revenue, is now a shell of its former self."

"While it has shuttered many of its branch offices in recent months, the company is alive and trying to resize to survive, said Chris Ratliff, the founder's son and managing director of Northern Pacific Mortgage, the company's mortgage banking arm."

"Broker Rick Hearn, who ran the Middletown office of Investors Trust until it closed Aug. 1, said there were discussions through the spring about some offices closing, but he said he was "shocked" by just how many have been hit."

'"A lot of us were left not knowing anything other than they were consolidating, and then they consolidated to next to nothing," Hearn said."

"Hearn said the blame game going on over who is responsible for bad loans all too often settles on brokers, he said."

'"The easiest guy in the world to point the finger at is the guy that got you there," said Hearn, who has since begun working for another mortgage broker."

"You can qualify a monkey to buy a house, but the question is can he afford it," Ratliff said.
Unlike its competitors, he said, Investors Trust's loan portfolio has not been plagued by bad loans the company has been forced to buy back from investors alleging fraud."

"Ratliff said it is painful for the company to part ways with so many people, it is necessary given the sharp drop in loan volume. From a high in 2005 of $33 million in revenue, the company last year generated about $15 million, he said. This year it is on pace to broker just $6 million to $7 million in home loans, he said."

"The company had hoped the housing market would turn around this summer, but Ratliff said by spring he realized that wasn't going to happen. He now doesn't expect a turnaround in the market until spring of 2010."

'"When times were great, we grew as quickly as we could, and now that things have slowed, we're contracting," Ratliff said."

"NEW YORK (CNNMoney.com ) -- Prime mortgages are starting to default at disturbingly high rates - a development that threatens to slow any potential housing recovery."

"Prime loans are just the latest class of mortgages to suffer a spike in failure rates. The first lot to go bad was, of course, subprime mortgages, whose problems set the housing meltdown in motion. Next were the Alt-A loans, a class between prime and subprime loans that doesn't require strict documentation of a borrower's assets or income."

"Now, as prime loans are added to the mix, the resulting foreclosures could haunt the housing market for a long time, according to Global Insight's Patrick Newport."

'"Home prices will drop for quite a while - maybe several years," he said."

"Washington Mutual CEO Kerry Killinger said last month that the bank's prime loan delinquencies are on the rise."

"Also last month, JP Morgan Chase CEO Jaime Dimon called prime mortgage performance "terrible" and suggested that losses connected to prime may triple. For the second quarter, the bank reported net charges of $104 million for prime rate delinquencies, more than double the $50 million recorded three months earlier."

"The delinquency rate for prime mortgages worth less than $417,000 was 2.44% in May, compared with 1.38% a year earlier, according to LoanPerformance."

"Delinquencies jumped even more for prime loans of more than $417,000, so-called jumbo loans. They rose to 4.03% of outstanding loans in May, compared with 1.11% a year earlier."

"And prime loans issued in 2007 are performing the worst of all, failing at a rate nearly triple that of prime loans issued in 2006, according to LoanPerformance."

"Prices are already off nearly 20% from their 2006 highs, according to the S&P/Case-Shiller Home Price index."

"2.8% of all homes for sale were vacant as of June 30, according to Census Bureau statistics. That's up about 50% from three years ago, and near historic highs"

"The failure of prime mortgages will also make it more difficult for new borrowers to find affordable loans - and that will slow sales even more. Lending standards have been tightening for months, but if prime loans start to look risky, lenders will be even more conservative about who gets a mortgage."