The changes from the credit crunch are painful but livable. I said last quarter, the cash-out refi's had disappeared; well now they are raising the bar on standard loans. Now you have to have 10% or 20% down and have a full documented income. To those of you that have purchased houses over the last 30 years, you would expect nothing else. The "loosey goosey" times of easy credit are history.

   None of this is a surprise. We've been seeing rising credit standards since last fall. We just hadn't seen lenders go out of business over night. Those that are still in business are now flooded, so there is a backlog that is being worked through presently.

   The challenges we have in the current housing market will continue for some months ahead. We still have many ARM's resetting. There are three times as many to reset at the end of this year that have already reset last year. Estimates have been about 2 million loans. However, with the 50 basis points drop in the fed rate, the pain of the reset won't be nearly as traumatic. There will be more bad statistics from the housing industry that you'll see in the news. With all this negative news, mortgages rates are actually lower then they were last year. This leads to wonderful opportunities for the real estate investors! The buying opportunities that my borrowers are seeing are as good as they have ever been.

   These changes in credit have changed the exit strategy of many of my borrowers. I'm seeing 60 to 70% of my loans as buy and refi's when in previous years, it was never more then 10%. This is happening for a few reasons. First of all, the sell cycle is longer. Some don't want to chance being on hard money for an extended period of time. Secondly, the rental market is very strong. The service worker, or blue collar worker with a spouse, two kids and a dog, doesn't want to move in to an apartment, yet can't get financing for a home. Lastly, that same person would have limited choices in apartments because so many were turned in to condos.

   I have added a net $600,000 of new investment money; we have $14 million in the portfolio.

   I have updated the pictures of the current properties on the website. Thanks for your trust, investment, and referrals.

   Denny J. Chittick