Are mortgage applications being denied at a higher rate?

Yes. With the credit crunch in full swing even good credit applications are being denied especially in “high risk” areas like California and Florida. I was discussing this in an industry bb where one Florida broker mentioned he only closed 1 loan out of 10 last month and the reasons for the denials were more property related rather than borrower related.

This reminds me of the late 1970’s and early 1980’s when mortgage rates topped out at 19%. Institutional mortgage lending ground to a halt. If a home owner wanted to sell, he couldn’t find a buyer who at 19% could get qualified for a mortgage. But the market found a way.

Seller financing grew exponentially during that time where the seller became the “bank” just to move his home. Even though this not possible due to current mortgage terms prohibiting it, hopefully another way will materialize to break loose this mortgage liquidity “log jam”.