Last week’s LA Times featured a good overview of how getting a mortgage has become both more difficult and more expensive for many California homebuyers across the creditworthiness spectrum. The article sums up the problem like so:

Because mortgage investors stung by growing defaults in the sub-prime sector are shunning all but the most traditional loans, creditworthy borrowers are getting hammered if they want mortgages with payment options or the “jumbo” loans used routinely in Southern California and other high-priced home markets.

If you get such a loan, you’ll pay a higher rate than before. And to add insult to injury, it’s taking more time for all mortgages to get approved and funded, market experts say.

The problem this time around is that investors appear to have completely lost their until-so-recently insatiable appetite for mortgage-backed debt securities. With that source of funding gone, lenders either have to loan out their own money or to sell the mortgages to government-sponsored mortgage financiers Fannie Mae or Freddie Mac. Fannie and Freddie, however, will only purchase so-called “conforming” loans. These more stringent requirements reject many of the “creative” mortgages that were so commonplace during the boom. Even more painful here in the land of the half-milllion dollar hovel, they also rule out any mortgage larger than $417,000.

Such mortgages can still be had, as the LA Times piece points out, but only at a premium. As a result, Southern California homes have just become even less affordable, and they are likely to stay that way until the market for securitized mortgages comes back to life.

— RICH TOSCANO

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