Mortgage money and interest rates continue to be key bright spots in the outlook for the real estate market this week. But there are some clouds gathering on the mortgage horizon that buyers and sellers need to know about.

First to rates: They remain very affordable for borrowers with good credit and the ability to put a cash down payment into the deal. The latest Mortgage Bankers Association national survey found average rates for 30-year fixed conforming loans at 5.75 percent, and 15 year fixed rate loans at 5.27 percent.

Looking ahead a couple of weeks, Wall Street analysts and investors are banking on further reductions in short-term rates -- as much as another half point -- from the Federal Reserve when it meets April 29 and 30th.

So that's all positive news for housing.

But average rate quotes aren't the whole story. There are some potential problems taking shape: Lenders increasingly are imposing stricter underwriting criteria and extra fees on applicants before they'll approve loans.

For example, Fannie Mae and Freddie Mac both recently came out with tough new standards for condominiums that require loan officers to check out buildings' underlying legal documents in advance, and to review other aspects of condo loan applications in great detail.

Along with other major private lenders, Fannie and Freddie also have been ratcheting down standards on credit scores and down payment minimums -- and that's on top of higher fees for properties located in so-called declining markets.

Still another worrisome development: More and more big banks are withdrawing from what is known as the "wholesale" channel, where mortgage brokers send in home buyers' applications for funding. Washington Mutual Bank, a huge player in the wholesale market, withdrew earlier this week. Bank of America had already done so, and it may require Countrywide to do the same once its acquisition is completed later in the year.

All of this means fewer -- and more expensive -- sources of funding for the estimated one half of all buyers who depend on brokers to find them mortgages.

In other news of note this week: Pending home sales declined 1.9 percent, and Dr. Lawrence Yun, chief economist for the National Association of Realtors, said home sales are expected to remain relatively flat for the next couple of months, until the higher loan limits of the economic stimulus plan begin kicking in.

More significant, perhaps, Dr. Yun forecasts a big upturn in the second half of the year, with fourth quarter sales at a 5.9 million rate nationwide. That's about a million higher sales than the rate right now.

Published: April 10, 2008

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.