Home : Blogs : Eddy Martinez : Eddy's Blog

Another One Bites the Dust

FW: LENDER'S DIRECT OFFICES SHUTTING DOWN TODAY PERMANENTLY....

Thursday, February 8, 2007

It is with deep regret that I announce effective end of business today the closure of Lenders Direct Capital Corporation's Wholesale Lending Operations and the Layoff of the Company's wholesale staff.

The current state of the US nonprime lending industry (and the default risk associated with it) as a whole and the resulting lack of investor demand for the Company's nonprime loan products are important factors in reaching this difficult decision to cease wholesale originations and fundings effective immediately.

I wish to take this opportunity to sincerely thank each and every one of you on behalf of Management for your tireless work and dedication over these past 3 ½ years.

------------------------------------------------------------------------------------------------------------------------------

I just recieved the above email a few minutes ago and actually i was quite shocked. I funded three loans with them last month and i had a great relationship with them and my AE. I would sometimes broker some of my out of state loans beacuse they had excellent pricing for my clients. The AE for this lender was actually here at my office last week, now she is out of a job. She didnt see it coming. But thats just how it is in this business one day you are a star and the next day you are gone. 90 % of the people who worked for the company will be back in the mortgage industry in some sort of way. Survival of the fittest is the name of the game. We are seeing the underbelly of the Real Estate Boom unravel in front of our very eyes. Home values are not dropping , they simply adjusting to where they should be. This is trend is much more prevalent here in California.

Whos next to bite the dust? Only time will tell.

Any predictions?

New Century is going through some issues with their high default rates. Their stocks are plummeting as well.

Eddy Martinez

Best Rate Funding - Direct Lender - Wholesale Rates

Senior Loan Consultant

Direct Line: 1-888-702-2225 x. 115

E- Fax :1-310-943-6551

bestrate Funding

"A business that makes nothing but money is a poor business. "
- Henry Ford

Posted by Eddy Martinez on 02/08/2007 07:49 PM

Comments (85)

bk, out of business

This post has been included in California Information Los Angeles County, CA Information South Gate, CA Information

85 Comments on Another One Bites the Dust

FEB

2007

Eddy, Mortgage Lenders in Middletown Connecticut just shut down their Whole Sale and Suprime divisions last month because of to many bad subprime loans, they were doing some very risky stuff. They also just let go of a bunch of people in their A paper division.

It is survival of the fittest, but it is easier to survive if a company is not making loans that no one else will touch.

I know that there is a lot of homeless L/Os out there these days. (also processors, underwriters and closers) Subprime has gotten to risky and expensive. People will just have to have better credit and some money down.

George when you say risky , i have seen brokers doing illegal activties. Bumping ficos , falsifying income documentation, the works.................

Cynthia, yeah i know a few LOs who actually are doing processing just for the constant income. Its a revolving door and its only going to get worse.

Eddy, I have not seen that, but these guys were doing loans with credit scores under 500 without a home for them, so when they could not sell them off, it all hit the fan.

George wow now thats amazing. Well those guys are now out of the business for the most part.

Eddy

Eddy,it is always a sad day when you see companies go out of business. A few mortgage brokers have closed their doors here and Title Companies seem to be consolidating some of their offices and letting some of their help go. Same thing I think is happening with some of the agents who have found that it isn't as easy as they thought. The next couple of years should tell the tale.

FEB

2007

Subprime as we know it is disappearaing quickly. There will be tremendous opportunities on the lower end of the credit scale for those in the know.

Will this be a return to asset-based lending for sub-600 scores? I hope so!

Infinitely more interesting was HSBC warning last night (New Century blowing up was a pretty close second). Since they are one of the largest banks in the world and heavily involved in the second lien business (the 20 of the 80/20). They are going significantly tighten, if not do away with, that portion of their business. What that means is that they are affecting a much greater portion of the market for every dollar they turn down that is $5 less in the marketplace. PMI won't touch many of the deals that the second lien market has been grabbing the last few years.

And what is even more interesting is just how wrong their "sophisticated modeling" was, a team of 150 PHDs working on their credit scoring model. And it turns out, at the end of the day, FICO just isn't that good of a determining factor when you risk layering so much.

A lot of the problem is on the unethical mortgage brokers that defraud the lenders. In Dayton Oh there is an ongoing probe into a fraud sceme. 350 homes with a total of 22 Million in loans have been discovered to be fraudulent so far!

believe it or not I heard that countrywide is in talks with Bank of America.

Eddy: I just read New Century is deep in the crapper, their stock dropped more than 36 percent to $10.92 a share. HSBC has to set aside some 10.6 billion dollars to cover loans they won't be able collect.

Buy backs among local Brokers here in Palm Springs are on the rise as are those who are closing their doors. The sub-prime folks have no one to blame but themselves, I can't tell you the number of times I've been told to take a loan state and "make it work." Our AE at New Century is famous for this, it doesn't matter how high you state the income it won't enable the borrower to repay the loan if they're not earning the income.

Countrywide and Bank of America are in talk again, this time it looks like Bank of America wants Countrywide to service their loans only.

All this is happening while I'm in Vegas, I've been looking at some of the condo's on the strip and it amazes me that Trump is getting as much at 1.3 million for a condo located across the street from the Wynn hotel.

As I sit here on the 60th floor I wonder were all the money is coming from for all the construction I see going on. I'm afraid we're going to see the late 80's early 90's return. I hope everyone is buckled securely in their seats, it's going to be a bumpy ride.

Ed Brophy
Synergy Mortgage

FEB

2007

In light of all these sub-prime lenders disappearing, I just received an email the other day stating that Flagstar is opening up a sub-prime division. This could pose to be very interesting. For those of you not familiar with Flagstar, they do everything electronically and can get clear to closes within hours of file submission. (Fastest that I got a CTC from submission was about 3 hours), plus they generally have competitve A paper pricing. Let's see what they have to bring to the table on sub-prime. Hopefully, it will be good.

That is why I love FHA.... so many lenders still have no idea on how FHA works...or even have it at their disposal. Sure,you can get some accepts from Fannie and Freddie... but when you can't, many lenders go to the sub prime programs first.

Jason... in regards to electronic approvals for sub prime..... I would put millions on it that Flagstar will be just like Countrywide in this aspect. You have to be able to have backing on Wall Street. If not... especially in todays day and age, companies will not go out and take great risks. I know you are happy with them because of their quick clear to closes when it comes to A paper.... and I have received a several of these from such companies as Decision One and Option One, when it comes to sub prime loans. But from my experience, unless that company has been doing it for a while in regards to that specialty, they will not be leading in the rates and or programs. It's just been proven...especially because of the risk. And my whole point, why would I use a company that could spit out a clear to close on sub prime so quickly, when they are still out priced in the market.

I am using this as my opinion but also from examples that I have had, even with Flagstar. Example... Flagstar has a big commerical division, but it's just average though. They promised a client of mine this great commercial rate, which I told the client that it wasn't going to happen. I couldn't find one lender out there, out of 20 other commercial lenders... even my guy who has 100's of contacts. Sure enough, the client called me up 2 weeks later, telling me that they denied the loan...after they said they could do it. And I told her why it would be hard. As I am trying to say, unless you have expertise and experience in this, it's not as easy. And would a company be testing this type of market when it's on it's down swing. Maybe to get market share overall?

FEB

2007

Ed yeah new century is definitely in deep trouble.

We will see what happens

Thanks for you comments everyone

Eddy

FEB

2007

As this to shall pass! But when, how long, how many? You can rely on changes for a while to come. Are you re-looking your business plan, are you adapting? Will you survive the changes? Very inntterrestting!

It is only the start for this week. HSBC may be selling HFC & Decision One, Argent/Ameriquest will be sold before the week is up and problems with New Century and First Franklin may see them being put on the block

Argent is pretty much done thats what an AE told me.

Eddy

I heard something like New Century would start doing A paper loans...

Maybe if HUD comes down harder on mortgage fraud some of these subprime lenders wouldn't go under. The alternative is to raise subprime rates even higher, which sucks for the subprime clients who are good people.

- Tchaka Owen
http://tchakaowen.blogspot.com/

Sorry, but I have to jump in here. Tchaka..... what does having HUD coming down harder on mortgage fraud have to do with sub prime lenders and not going under?????

Department of Housing and Urban Development. Federal agency responsible for encouraging housing development.

HUD -- the U.S. Department of Housing and Urban Development; established in 1965, HUD works to create a decent home and suitable living environment for all Americans; it does this by addressing housing needs, improving and developing American communities, and enforcing fair housing laws.

First off.... they are very strict when it comes down to fraud.... FHA is a great example. And with FHA, that does not discriminate against FICO scores, more times than none, are people placed in sub prime loans rather than a FHA loan.

So... my opinion.... I would worry about those that don't know their mortgage programs and or lenders that don't have FHA available to their clients.

Again, just my opinion, but an opinion of over 14 yrs in mortgages.

TCHAKA SAID: Maybe if HUD comes down harder on mortgage fraud some of these subprime lenders wouldn't go under

JEFF SAID: what does having HUD coming down harder on mortgage fraud have to do with sub prime lenders..?

BRIAN SAYS: The sub-prime lenders dig their own grave, boys. They gave away money and fed it to a hungry Wall Street dying for product to pull itself out of the doldrums. That it did. The party ain't over. Subprime will emerge like a prostitute that found God. That will leave a vacuum in the marketplace...which leads to opportunity, which leads to profits, which leads to abuse, which leads to this whole meltdown in 8-10 years. This meltdown will seem bad but the 98 sub-prime meltdown was worse.

Your opinion is very valuable, though I wouldn't qualify it with "over 14 years in mortgages" because then it seems as if you must justify it and that merely lessens its impact. Since ActiveRain is set up as an exchange, all opinions are welcome whether with 1 month in the industry or 50 years.

Having said that, my point should be seen as a transitive one. Lenders going under due to bad loans. Why are there all these bad loans? In some instances it's due to unfortunate circumstances, in many it's due to fraudulent practices. If there's more oversight in the mortgage arena with penalties meted out, will that stop fraud? No. But will it lessen the severity of it? Hopefully. If fraud and other bad loans are lessened, will that prevent or slow down the number of banks in that segment from closing their doors? Probably.

It's not a cure-all but better than zero.

- Tchaka Owen
http://tchakaowen.blogspot.com/

Preach on, Brother Brian! :-D

- Tchaka Owen
http://tchakaowen.blogspot.com/

Tchaka.... okay, I have 1 year in the mortgage business, you made your point there. But you still didn't answer my question, What does HUD have to do with sub prime and rates going higher? So, I bring my years into the mix, because it justifies experience then and not opinion. Don't get me wrong, opinion is great, but HUD is not an opinion.

As Brian Brady stated.... Wall Street.... not HUD. Investors that make their own rules. And they got greedy as he stated and have dug their own graves.... again, has nothing to do with HUD. That was my point....

Ah, that question wasn't clear to me in your first post. They don't have anything to do with each other but I do see why you're confused. It appears I'm implying that HUD needs to raise subprime rates, but that is not the case. What I'm saying is that subprime lenders will need to raise their rates due to the higher risks. Whether that's initiated by Wall Street or some random investment group backing a bank makes no difference, point is they will rise.

Sorry for the confusion, hope this is clearer.

- Tchaka Owen
http://tchakaowen.blogspot.com/

FEB

2007

We're all on the same page, boys.

The two aren't directly connected; Jeff's correct when he says that. All products are interconnected and are being decimated by the explosion of fraud in each product subset; Tchaka's right there.

I have a more interesting follow up question for both of you. What are YOU going to do when the well dries up in subprime? More experienced originators (like you, Jeff), should benefit. A paper originators (like you Tchaka) should not worry too much. Hard Money Lenders (like me) are chomping at the bit so we can upgrade our loan quality for our investors.

How does this shakeout affect YOU?

problems with New Century and First Franklin may see them being put on the block

Merrill Lynch bought FF from Nat'l City about 4 months ago; their problems have been solved...for now

This Countrywide and Bank of America deal is going to have a LOT of trouble passing through.

I moved my novellette here it made more sense there:

http://activerain.com/blogsview/45321/Countrywide-and-Bank-of

James Gordon:

Unethical Mortgage Brokers...hmmmm... Usually these fraud schemes require collusion between many people - including realtors, appraisers, title companies, attorneys and yes even underwriters at lenders.

Don't blame the entire bulk of fraudulent activity on one group. The big schemes that actually require investigation are NEVER just the mortgage broker.

In Dayton OH, it wouldn't just be a mortgage broker they'd be looking at anyway. In the Midwest, there are often organized crime ties to mortgage fraud. Many of the organized crime groups have found that it is a LOT easier to commit mortgage fraud than to do anything else they might have gotten into before.

And... often times these aren't Mortgage BROKERS - but Originators. Remember that Brokers are licensed. If you are licensed, the penalties are much more severe!! An LO could go around the country committing fraud and get hired over and over again because there is no licensing agency tracking that person. Originators fly under radar because they are not required to register with the State Licensing agencies... especially if they work in one state and commit the fraud in another (yet another reason to work with local mortgage partners).

Active Rain needs to be a forum that helps us get past these perceptions that are just false.

talk about going from one that bites the dust to fraud and HUD and just sub prime in general.....

FEB

2007

Just heard on Monday Resume closed its doors... when will this end?

Its ResMae, and yeah, heard that too. Also, Fremont is going to stop doing any piggyback 2nds. Other rumors I have heard...Southstar AE's are quitting in droves, never a good sign; Fieldstone is closing 5 west coast branches; many like Own It and Sebring have closed completely.

Jeff, FHA loans are wonderful, consumer-oriented loans. There is a new generation of mortgage people who have never done one. Here in California prices have outpaced the FHA loan limit, and during the recent 6 year long seller's market, no seller would even look at an offer with FHA financing because of the FHA non allowables and FHA's fussiness with appraisal issues.

All that has changed now. The biggest obstacle to using FHA loans today is that almost no one qualifies "full doc" anymore. How's that for a market commentary, eh? What drove people into subprime loans was that those boys were the first kids in the water doing 100% "stated income". That became the replacement for FHA and the lazy lenders way to do low/no down payment loans.

Brian, yeah the industry got greedy, but buyers got greedy too. Even my first time home buyers the last few years have been more interested in short term profits than long term shelter. I'm fine with calling in the air strike on our own heads. We have been infiltrated by scoundrels and crooks. But consumers aren't innocent.

FEB

2007

I think it's very interesting that there is such hardship in parts of the industry. I think of it as Darwinian. If you lie, cheat, or suck at what you do, you are out of business. It applies from top to bottom. It's fair.

I personally look at it as an opporunity to build a marketshare. AE's will have to be better and more honest, as will LO's and the lenders themselves. I'm very enthusiastic about the future.

FEB

2007

Just heard late yesterday on the rumor patrol that WMC is on the way.....

I heard yesterday that WMC and New Century are on there way to the BOTTOM... I know of two AE's and three underwriters that were let go at New Century last month and they are expected to cut more! All I can say is that the strongest will survive and the rest will parish.

I do know of several mom and pop shops that are shutting down around here in Fresno and that is a geat thing for me because that means there are more borrowers in need of loans in the area and the less competition the better.

On a closing note I wanted to say... GOOD LUCK TO ALL!!!

Marc B. Some very key points that were brought up. Thanks for sharing that feedback. It's making me think on some issues.

FEB

2007

Yeah from my experience it does seem like there is a big shake up out there with lenders either changing their guidelines or closing up. It would be nice if every client had great scores, assets, and money to put down. But that isn't going to happen. So its a matter of adjusting to the conditions.

The subprime industry went through a very similar shakeup in 1998, with major player like Southern Pacific Funding, Conti Mortgage, and Unicor folding. It is a cyclical business and it looks like FHA is undergoing some changes to become more effective in today's market. They have rolled out a "Streamlined K" program and are talking about doing 100% financing as well.

FEB

2007

Everyday some one seem to be going out of business. More and more I am seeing the mortgage professional droping by the office because business is not readily available. I can remember just a short time ago you wouldn't get a return call.

FEB

2007

I think the fat lady is warming up for WMC..... I sent a file in they told me that the credit dropped 50 pts. When we submitted to another a lender we found that the credit actually went up.....hhhmmmm When I questioned it They sent me a denial...

MAR

2007

I'd say you were right about New Century: with 10 class-action shareholder lawsuits filed this last week and with the feds investigating the management for insider trading, I'd bet that they announce a major restructuring or bankruptcy by the end of next week. I think Doral Mortgage and Ameriquest as well as Countrywide may be on the skids as well.

MAR

2007

It is begining already, got the e-mail from my New Century AE this morning. They are cutting 100% programs entirely including 80/20s at every credit and doc level.

Just got an email from my Fremont AE, they are shutting down operations completely!

Bad news for New Century:

http://money.cnn.com/news/newsfeeds/articles/djhighlights/200703050925DOWJONESDJONLINE000312.htm

- Tchaka Owen
http://tchakaowen.blogspot.com/

Interestingly, I just got this from my New Century rep:

Good Afternoon,

I would like to take this time to address the many rumors traveling throughout our industry. As you may know, many of our competitors have been forced to shutdown their sub-prime operations or re-organize their lending practices such as extreme adjustments to their guidelines etc. For years, New Century has been the cream of the crop in the sub-prime world which has led us to a better position in the market place than our competitors. To address the rumors directly, we are not closing our doors. Instead, we plan to adjust our guidelines to provide the market with a better quality of loans and maintain our stranglehold on the sub-prime market through these challenging times. Our most recent adjustments include the 80/20 and 100% One Loan, which we will no longer offer on the sub-prime level. These changes aren't isolated so we can expect industry wide adjustments to this product. You can, however, offer the 80/20 on our Alt-A guidelines. Surprisingly, the stated Alt-A 80/20 requires a lower credit score than our previously offered sub-prime 80/20 (was 700 now 680). You can qualify your borrowers through our prequal engine located on www.newcentury.com, as normal.

Wachovia Correspondent is gone

WaMu shut down buying subprime so Ameritrust subprime is gone

tick tock tick tock - its getting scary now. :?

Plum, I like plums. :)

MAR

2007

Subprime is definitely going be reduced to just a few investors (lenders) who will pretty much corner the market in the next 6 -18 mths. Those lenders are the ones who watched their portfolio closely and stayed away from doing alot of bad paper to ensure that their investors would be their loans. If you research and ask those who went through similiar markets back in the late 80s and early 90s will tell you. This is a market correction that in many ways will weed out those mortgage brokers/companies/loan officers who helped originate fraudulent loans and of course the lenders who encouraged it. Realtors who thought it would be so easy to make tons of money got in the business back when you could trip and find buyers who begged them to help by homes. How many of us will survive, only time will tell. Like Eddy says, it will be "survival of the fittest"

What interests me is whether or not we'll hear about the number of real estate agents that have left the industry and have moved into a different field all together.

Man, I love mango!

MAR

2007

It's time to join forces and scream this from the top of a mountain!! Someone, somewhere needs to step up and actually change legislation and foreclosure laws!! This nonsense of originators stating whatever income they feel like putting on a borrowers mortgage application, and then lenders buying the deal even though they know it's a bunch of B.S. ultimately hurts the consumer. These poor consumers get way in over their head, can't make all their payments, and lenders just say... "Get out on the street, your house is mine now." No, No, No. I feel the lenders are in the deal with the borrower and should shoulder some of the responsibility. Simply allowing a person maybe once every three years to take up to 2 months worth of payments and place them onto the back of the loan would solve 60% of foreclosure trajedies. Carmax auto finance does this and they have the lowest repo rate in the country. You can defer a payment. What causes many foreclosures (not all) is that when you fall 30 days behind, lenders take a bully attitude and say... "you must make two payments now, we don't want your stupid one catch up payment". And, if you don't make two payments right now, we're adding fees and possibly even lawyers fees. You might as well start packing. When people lose a home, they get very hurt financially. Plus they undergo an unsurmountable amount of stress. I believe there should be a law that states... When a person falls 30 days behind on their mortgage, in order to get any leniency from their lender, they must go to a foreclosure prevention class. If they attend the class, the lender MUST assist the borrower to protect their home. This may include helping the borrower to get their home sold if their is no hope, or possibly reducing some payments or whatever. This nonsense of selling peoples homes on the auction block to a bunch of shark investors WHO MAKE ME SICK is not right. I have known half a dozen cases during my real estate career where people lost their homes to foreclosure and DIDN'T EVEN KNOW IT. Now, multiply me times a million loan officers and do the math. The way the law is now, people are screwed by the hundred year old foreclosure laws. We are better than this. Many people's suffering could be prevented. Instead of subprime lenders closing their doors, they should have WORKED WITH their borrowers.

I care about all you fellow loan officers. It appears many of you are scared. I adapted last year to become a loan officer AND a FINANCIAL PLANNER. 1.4 TRILLION DOLLARS WILL MOVE AROUND THE FINANCIAL PLANNING WORLD OVER THE NEXT 10 YEARS. No foreclosure problems. No underwriting hassles. no fico scores. It's a great industry helping people to retire as millionaires. Everyone wants it. I submit a lot of IRA business through ING. They are not closing their doors due to fraud and a collapsing market. Baby boomers understand they must plan now to be able to retire later. I earned over $40,000 last month. My friend earned $72,000. All you need to do to survive is add financial planning to your mortgage business and you will be very rich, very quickly. Example... I just rolled over $60,000 from an old 401k into an IRA for a customer I did a refi for. This earned me an extra $6,000 and took me about an hour. You can go back through your mortgage customer base and make well over $100,000 doing retirement plans for them now. Which feels good to help them. Feel Free to check out my profile and blog at http://www.activerain.com/more_than_loans

I hope you don't mind this entry Eddy. I'm just trying to help your friends who sound scared.

p.s. Eddy, if you are too busy with mortgages, I can do financial plans for your customers and give you half!! That's an easy hundred grand for you in 2007 with no work. You would have to get securities registered though for me to compensate you legally. Doesn't take long.

MAR

2007

Its official.... New Century stop taking new applications....

Our entire industry is in trouble now. The closing of the Lending Offices will indeed effect our Real Estate market as a whole. Our public is not uneducated these days, they read, see foreclosure signs within their neighborhood, when is this going to end? Good question, and our government is doing very little, very slowly, as if they just don't care.

Everyine please just relax.No one should panic. Instead let's put our heads together and get through this.B/C lenders have gone out of business before. Let's approach this as an opportunity and a challenge.

I'm ready,are you?

MAR

2007

Jeff is exactly right! If you don't see an opportunity than are you the one that looks as though the glass is half empty? The truth is it is not the goverments fault nor should we look to them to bail us out. What happened in the B/C market is their own fault. Lets face facts should a 550 FICO really have 100% stated loan? Did you really believe they where going to make all the payments?

I have started working with a group of investors and now is the time to take advantage of long term properties.

MAR

2007

Awesome Post Eddy. I have included it in my post Subprime Groin Hit!

MAR

2007

Just read that People's Choice filed bankruptcy, Fannie Mae has refused to buy any more New Century loans, and Wells Fargo is laying off 500 people in their subprime unit.

Since when has my blog become an advertisement page?

The issue at hand is to be discussed, save your solicitations dont use my blog.................

Eddy

Eddy - you selling ad space now? Get real people. This is a community forum not a metro bus --- LP

MAR

2007

As a former AE for 3 subprime lenders (that are all out of business now), it makes me sad that all these lenders are having trouble selling their loans. Sure, the "stated" loans probably weren't a good idea for most subprime clients, but the full doc ones should be OK.

The good news that no one talks about is that Many of the largest banks are buying hundreds of millions and billions of dollars worth of subprime loans at a discount (that they originally had to Pay 103 -104 for), so everything is Not as Bad as the media (and some members of Congress) may make you think.

Sure, guidelines are becoming more conservative, but think about this: Fannie can do a 575 borrower at 100%.

p.s. Sunset Direct (OR) stopped taking apps and funding loans today (3/22).

- Al

MAR

2007

(In the voice of an old prospector) Back in 86 when I got into the mortgage business

I'd guess that on the Missouri side of the St. Louis market (approximately 1.5 million people) there were maybe 300 to 500 places that you could go and get a long term mortgage to buy a home. Now I'd guess that there is over 3000 to 4000, maybe more. This isn't sustainable. I knew the end was in sight when I heard a commercial on the air that said something to the effect of, "We sold you your car, now let us finance your home!"

I don't mean to be harsh and I do feel for the folks losing their jobs, but the market needed to adjust.

Bob

APR

2007

Can't believe SouthStar closed its doors. I guess to many 100% Option Arms came back.. (gee imagine that one)

Writing was on the wall. Check out Jason Sardi's blog of a month or so ago.

APR

2007

I agree with Bob, it needed to adjust. I think it is quite exciting and I am sooooooo excited to see what the near future brings..

Take care,

Jake

Any news on this front as far as other lenders biting the big one?

Also, not to seem tacky, does it seem that some of the more snooty lenders where the first ones to bite the dust?

R.B. "Bob" Mitchell

ValueList Real Estate Services, Inc.

APR

2007

Has everyone heard of all the lawsuits against subprime lenders by states like New York? Now subprime lenders who would have stayed in the game, have closed their doors, hoping to sneak away quietly like a mouse out the back, and not get involved in any lawsuits. ALL THE SUBPRIMERS WILL GO NOW. What company wants to risk a multi-hundred million dollar lawsuit from the government? It's not just getting scary, It's over.

On the flip side, I decided to do some r.e. sales along with my loan business. I grabbed a quick job at Coldwell Banker. Really to see what was going on more than anything else on the r.e. sales side. The home sales board is FULL. It's nuts. There are so many sales it's unbelievable. I am working with tons of buyers and there is no slow down in sales at all. Realtors are just telling people... "You have to have at least 5% down or we can't get you a loan". You also should have your credit checked immediately for any mistakes, because right now, lenders won't take you if your under 660. And ya know what, the customers are doing as told. Now as far as stated income, lenders aren't taking anymore loans where people say... "yeah, I make $14,000 a month but I can't show anything", so the result of that has been that home prices have been dropping to the level where people can honestly qualify. Our office sells a ton of homes, but everyone is a price reduction. EXPECT ANOTHER 10% DROP!! We just listed one for $685,000 that was appraised last year for $795,000. Prices are coming down because without stated, people cannot qualify for the high prices. There is no more "I make $2,000 a day" but have no down & a 580 score B.S.

IS YOUR JOB SAFE??

I heard a 'RUMOR' that there was an ad in the paper by a law firm looking for people who felt they had been wrongfully foreclosed upon and evicted. Uh, Oh. "Well, my loan officer wrote down $8,000 a month on my application, but I just figured he was calculating my social security future income or something, I don't know what he did". Next thing I know, my payment was $3,500 and my wife and kids were sleeping in the car with me almost half froze 'cuz we had a lock on the door."

Fortunately for me, just blessed by God I guess, I've been doing more financial planning than loans, so I don't have anything that's gone bad.

But I can tell you this, with trial lawyers on the prowl, if I had a mortgage company, I'd close it tomorrow & buy a McDonalds. Maybe even leave the country. Ya know the rule is, if they can't serve you, you're free. Is your job really really safe??

The sky is falling, the sky is falling! No Randy, for those who have broken no laws, they have no fear of penalties or flagrant lawsuits. Luckily in this country there is still something called "the burden of proof". Trial lawyers prowling for a quick buck isnt anything new, and a loan officer who has conducted his business according to his states (and federal) laws, won't need to flee the country. I have heard of just as many financial planners who mislead there clients on investments...buying stock in fake companies or just "go ahead and make that check out to me, I will invest it for you."

APR

2007

Thailand? Not sure where you would get that, I am thinking you shouldn't drink and blog!

APR

2007

It all boils down to greed. In an effort to maximize the dividends to their investors, companies were relaxing their underwriting guidelines to book more loans. The investors were happy because they were making money.

Now that it has hit the fan, the investors are the ones complaining that they have been aggrieved. In the end, we basically have no one to blame but ourselves.

Latest count of major US mortgage lenders that have croaked since late 2006:

51

Great site to stay on top of the SubPrime Tale of Woe:

Mortgage Lender Implode-O-Meter

http://www.ml-implode.com/

Jeff

Implode is a great site. only the facts

APR

2007

I can't believe that LoanCity.com closed. That was one of my fave lenders. Crazy stuff happening.

APR

2007

So with all these lenders going by the wayside. What's the lowest fico you can go now with 100% financing (or 80/20), STATED income w/ verified assets. Two months reserves and solid mortgage/rent history??

I believe the days of doing 100% on a 2/28 arm (for a good rate) with a 580 score are gone.

more_than_loans@yahoo.com

Randy,

So far I haven't been able to find 100% stated at any FICO from subprime lenders.

Jeff

Randy I can still do that type of loan at a 620 FICO all day long

Eddy

I think the issue isn't that a 620 can get the loan done, it's in how many states can you still do a 620 stated.

Here in Florida, yeah I can do a 620 stated. But not for the price of these homes. :)

Cool, Pomegranate.

Okay Eddy,

There are a bunch of Realtors I know right now that are looking for 100% stated with 640+ fico. All the banks they normally talk to are telling them they need 680+. As the deals roll in, I will send them to you. I heard it was still out there somewhere. And this is why I love AR.

For 100% subprime owner occ deals, Decision One (HSBC) says they can do a Stated deal with 680 score

and Chase BC says they can with 660 (according to recent email promotions).

Randy sounds good buddy i appreciate that, i will be waiting

Eddy

2nd up,

I'm having the worst time trying to find a buyer of mine a 10% down STATED income - VERIFIED assets purchase loan for a manufactured home on permanent foundation. Fico is 735 for borrower & 721 for spouse. Practically no back end bills and no derogatories except one $200 collection 6 years old (medical). As soon as I mention manufactured home, all lenders are yelling 25% down. Even with great ficos and perfect 12 year mortgage history.

This is a deal that is actually in escrow. Not just a hypothetical situation.

1st person to figure this one out gets the loan!! We are trying to get this one closed within 3 weeks. My borrower is retired foreman and can't show enough income. He does "cash" housepainting & roofing jobs. Spouse does housecleaning on a regurlar basis for "cash".

My customers actually do make the money, they just can't show it all. Purchase price on manufactured home is only $249,000. Their 12 year perfect mortgage history is on the home they are selling that has a current balance of $305,000. So we are going lower on payment. No payment shock. I have 10% down and 8 months reserves.

Randy,

Hope the don't live in Ohio - they hate people, so sayeth the mighty SB 185.

Yum, pineapple. :)

APR

2007

What a strange market it is right now. Luckily I have been able to stay out of the subprime market and do 98% of my business with Alt-A and A paper lenders. Give it another 6 months and things will get back to more of a norm.

APR

2007

As someone had mentioned above. The website www.mortgageimplode.com is a good resource into what's happening to lenders and other good information concerning our industry.

Leave a response…

Name:

Email:
(optional)

Comment:

What does the graphic say?