The U.S. mortgage market is going though a period of dislocation related to the increasing level of loan defaults, particularly on so-called sub-prime loans. While it started in the sub-prime market, the difficulties there have begun to bleed over into the regular mortgage market. As a result, formerly solid lenders, such as Countrywide (the nation’s largest residential lender) have begun to experience credit crunches of their own. Countrywide has resorted to issuing high-rate CD’s to raise capital to allow them to continue to write new mortgages. And this is on top of the firm having to tap into a nearly $12 billion dollar credit line last week

What impact will this tightening of credit markets have on borrowing for vacation properties? It’s likely that those lenders with funding problems in the primary residential market will lower the amount they are willing to loan of second homes.

If you are planning to buy a second home soon, be aware that loans for action homes may be harder to come by and the ready availability of home equity on your primary residence to finance such a purchase may also be tightening.

You will find further details on this subject at AllBusiness.com.