If This Is Tightening, I'm J.Pierpont Morgan

Countrywide Financial, the largest mortgage lender in the US, is finally tightening lending standards. Starting last week, they no longer accept applications for no-money down mortgages from sub-prime borrowers without proof of income.

My jaw is open - how about yours? I really am speechless. You shouldn't even be able to rent a mobile home in a tornado zone under such loose credit conditions, never mind buy a house in California.

Were they REALLY making such loans? I guess so...

Anyway, this "tightening" is so small, it indicates we are still in the very, very early stages of the downward part of the credit cycle.

Also, to follow up on comments I made about Spanish housing a couple of days ago, Bloomberg has an article out about the subject, titled: Vacation Homes Boom in Spain May Bust as Banks Recoil

I was in the area mentioned in the article a few months ago and I can confirm that the whole Costa del Sol, from Gibraltar to Almeria (about 500+ km), is one giant vacation construction site, with El Cheapest attached condominium projects machine-gunned from the water's edge up to the hills. We are talking, up one hill and down the other. I saw the saddest excess at Carboneras, at the far end of Almeria province, a grungy but laid-back factory town still undeveloped by comparison to, say, Estepona. Just around the corner (and down-wind?) from the huge, smoke-belching cement factory they are building this enormous "luxury" vacation-condo complex, having hollowed out an entire hill. It's still too new to see it on Google Earth, but the factory is very visible. Here's a picture - the development was being built slightly south of the factory.

Carboneras Cement Plant, Spain (Google Earth)
Click to enlarge