The latest data from ratings agency Standard & Poors shows just how fast the market for sub-prime mortgages has fallen. The agency saw a nearly 28% decline in issuance of mortgage securities for sub-prime borrowers in the fourth quarter. For the year as a whole, sub-prime issuance declined 7% to $420 billion, the ratings agency said.

Mitchell Ohlbaum, president of Legend Mortgage Corp. in Los Angeles, says he's seeing the impact of tougher loan standards first hand. Mortgages without downpayments--they made up as much as 40% the business during the boom--are now all but impossible to get unless you have stellar credit, he says. Loans that don't require borrowers to prove their income are also harder to get. "They're going back to basics and that's good," Ohlbaum says. "No money down, no job. Under what scenario is that okay?"

Lenders are now chasing borrowers with more equity in the deal. If you've got a loan that covers only 75% of your home's value, Countrywide Financial will offer you a lower rate. On the other hand the big mortgage company is trying to steer clear of speculators and house flippers. The firm now won't make loans to borrowers with poor credit who own another property within 100 miles of the one they are applying for a loan on.

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