"It all begins here..."

The real estate market typically heats up during the summer months.  This year, however, with the subprime correction in full swing, the National Association of REALTORS© is predicting a slight pullback in speculative buyers that could lead to a downshift in the entire real estate market.

For a lot of homeowners, this just means home prices are normalizing after an amazing run up over the last few years.  However, for many Adjustable Rate Mortgage (ARM) holders and borrowers with potential credit issues, this summer cool off could spell disaster.

It's all over the new: more than half of last year's  top 25 mortgage companies have either reported serious losses, been sold off to other companies, or filed for bankruptcy!  This has resulted in a tightening of lending standards and underwriting guidelines which has and will continue to impact the real estate market for some time.  In fact, bond expert William H. Gross predicts that the fallout from the subprime collapse will likely affect the housing outlook for years to come.

When asked how many borrowers would be impacted by changing guidelines and tightening credit standards, Bill Dallas, mortgage industry icon and former CEO of Ownit Mortgage Solutions, estimated "anywhere from 10% to 40%," adding "the coming shift in available products will be huge."

This could impact anyone seeking financing, not just throughout the summer season, but throughout the next 12 to 18 months.

What should you do now?

If you or anyone you know has a subprime loan, especially and ARM or a hybrid ARM about to reset to a higher rate, you need to speak with a mortgage professional right away.

With loan guidelines and credit requirements tightening so heavily, and property values still declining in many neighborhoods, you may not even qualify for a refinance into a more affordable or stable mortgage.  Fixed rate programs are approaching eighteen-month lows.

Remember, if you have an ARM, you loan will reset.  When it does, can you handle a 50% or 100% increase in your monthly payment?  Do you know what your margin is?  If not, invest an hour with your mortgage professional and find out all of your options.  Don't let foreclosure sneak up on you.  Take the necessary steps this summer to protect your biggest investment.

For anyone considering purchasing a new home this summer, schedule a credit review right away.  With the right credit score, buyers can take advantage of the increased inventories and lower prices available in many markets.  Don't let summer selling season pass you by.

Clark Harvey, Homes & Money Quarterly Newsletter, June 2007