We had a chat about this recently with one of our lender resources. She predicted by May of this year there will be no more zero down loans.

Too bad, yet another good thing ruined because people who should not be using the program did.

kk

Great article on Inman tonight about the subprime lender washout.  Part 1 of a 4 part series.

Kristal - I will remember your friends prediction.  I certainly wouldn't be surprised to see it come to fruition....

Stefan - Thanks for sharing.  I took a peek and washout describes it perfectly!

That will make it very difficult for those currently in 100% financing to do any refinancing - boggles the mind as to the potential fallout.

Tony - Yup, this could be huge.  And it will affect those folks who have money to put down but would rather invest it.  It'll prevent some underqualified folks from getting into a home and it will possibly also deter some qualified folks!

Kaushik,    The interesting thing about history is that it tends to repeat itself.  Particularly when dealing with cyclic matters such as real estate and financial markets.  We've seen this all before....does everyone remember the RTC?   Same industry, different decade.....

What's the difference between a 0 down loan and a Wooly Mammoth?..........................At least a Wooly Mammoth turns to fossil fuel!

"tangerine" 

Kaushik, we have only seen our Subprime Venders tighten up on the 100% financing.  All our other programs are still available to us,  and we have not heard of any changes coming down as of yet.

Countrywide was doing loans that a lot of us would not do, that might be why they are now in the situation that they are in. 

Tom - Thanks for the example.  Sometimes folks tend to forget just how cyclical real estate can be.....

George - Interesting.  What other big names were also doing lots of subprime loans, in your estimation??

Kaushik, I don't do a lot with Subprime, but the Venders that I have are New Century, Option One, and Long Beach.  All of them have done away with the 100% for now and cut back to 95% LTV.

hey guys, note that the 0 down are tightening up for SUBPRIME, not the prime loans.

There are still lots of 0 down loans, maybe not for stated income, bad credit situations, and maybe we should not have been doing loans like that....  

Great Blog. I am very happy I use FHA and KHC for my loans to 100%

Ben

George- Thanks for the info!

Mia - Very true, appreciate the comment!

Ben - Thanks!

There are many factors that led to this problem and it's a shame a lot of people won't be able to obtain a loan. But there has to be some common sense to lending. This crisis never should have gotten to this point.

Debbie - You are so right.  Things just spiraled out of control for a few years and that greatly contributed to our unsustainable boom!

The significant changes that have occurred among monoline subprime players in the last few months are causing a ripple effect that is being felt across the housing sector. Mainstream media has taken a special interest in the rapidly changing subprime environment because of what it means to homeowners and the economy as a whole. With the tremendous media coverage on this topic, it is no surprise that some of it has been inaccurate.

In particular, media outlets recently reported that Countrywide is no longer offering 100% financing. To be clear, this is not the case. We continue to offer 100% financing to prime customers and full-doc subprime customers. We also allow 100% subprime financing through the Competitor Match program. However, the number of competitors offering this program has shrunk markedly over the last few days.

In addition, changes to our extreme "Alt A" quidelines will be announced shortly as well. We should expect this tone and trend of tighter credit guidelines to continue for the foreseeable future as the market adjusts to the reality of a new credit risk paradigm.

We view the current changes in the subprime market as highly positive for Countrywide. I want to reiterate that Countrywide is better positioned than any company in our industry to successfully leverage the opportunities that will arise through this current market consolidation. As with previous post-boom markets, industry consolidation will create additional growth opportunities for the Company. We continue to focus on profitable market share growth, and our employees are central to our success in these efforts.

We got this e-mail today.

I work at Countrywide. Sometimes, what sells news is what gets printed in the news. Not too long ago, BofA was buying us.

Keith - Very imformative post.  Appreciate the insight!

You'll still see zero down loans. K. and C-wide is still doing them; just not for stated income.

You'll see some tightened guidelines for 2-4 years and then the craziness starts all over again.  It's cyclical. 

Brian - Definitely agreed that its cyclical.  I do think with better regulation and higher ethical standards/conduct by RE proessionals, we would see less of an impact from these cycles (I just blogged about this!)

I think it's a good thing to limit the 100% loans.  I know that current wisdom says to leverage Real Estate to the hilt, but if something happens in terms of illness or employment you are up a creek.  It's one thing if there are lots of reserves, but some these loans that were done were just irresponsible on all parties parts.

It's an overeaction, and I for one have a hard time believing that the government thinks more renters is a good idea.

I posted today with links to comments: The Federal Government Trying to Eliminate Down Payment Assistance?