Hey, folks!

You might remember the "salad" days of the the home mortgage market - a couple of years ago.

No real need for costly PMI!  Home buyers only needed to come up with 10% down, 5% down, or even 0% down, then take an immediate second to reduce the "visible" LTV to 80%.  In a year or so, many lenders advised, you can refinance your adjustable rate loan, perhaps lock in a low rate for the whole balance, and save considerable housing cost money each month.

You remember the feeling - housing will always appreciate, predictably and steadily.  And that second, higher-rate, usually-interest-only mortgage, can always be subordinated, if you had to.

Well, the tables have turned!

Back on February 18th, major mortgage lender National City Bank issued a directive to its in-house Loan Officers not to subordinate to primary loans unless these new first mortgage loans were underwritten by National City.    Other banks, facing high default rates, are expected to follow suit - fearing they will receive cents on the dollar if any subordinated loans fail.

In many cases, no subordination of the smaller, second loan could block or stall the re-fi.  For many borrowers, this means they will have to live with their rate resets - and corresponding severe increases in their monthly mortgage payments when their adjustable rates reset.

Is there a way around this?  For some, very credit qualified borrowers - YES!  They can take cash out on their primary loan, and pay off the old second.  However, many lenders are substantially curtailing available cash out for refinances, and, even if approved, will most likely result in a higher re-fi rate overall.

This week, rates ticked up again, on average, by some estimates, about 0.20%.  This can only exasperate the problem for many seeking to re-fi out of adjustable loans, ripe for resetting in the coming months.

Please read our post today via our Team Blog Center - BlogChicagoHomes.com - as well as the link to Kenneth R. Harney's article in today's Chicago Tribune.

DEAN & DEAN'S TEAM CHICAGO