Subprime or BUST!

Catherine, I am a lender, and yes I do sub prime loans.  You ask if I have been caught up in this sub prime experience, you better believe it!  I have a co-worker, loan originator like myself, who actually closed the loan, done deal, all doc's signed etc.  The loan will not fund.  The funding lender, who approved the loan, is out of business.  The largest one in the nation.  Gone, and most likely is filing bankruptcy.  My question is simple, isn't this fraud?  You bet it is.  (I love answering my own questions), especially this one.  We as lenders are as stunned as our partners, Realtors.  Don't ever think we do not care, as we do.  Not only for the Realtors, but also for the client that had their hopes and dreams of purchasing a home.  We want the experience to be something they will remember for years to come, an enjoyable one!  We did get the loan approved again, and will be closing again, soon.  This is unreal, and I have no idea what is to happen from here on in.  I just hope we can pull this economy out of the slump and keep our market strong. 

On a positive side note, us lenders with many years of experience are able to adjust and move back to the insured loans provided, and I think this will keep us moving in the right direction, and will be able to continue to serve our clients.  Have a great 2007, we can make a difference, we just have to do what we do best, sell, and take care of our strongest asset....our customer.

Catherine,glad you are back home. I feel much better now. As far as experiencing the loan aspect, I haven't had that lovely experience. Most of my clients for the past few years have been Sellers with just a few Buyers. But, what I have been experiencing are Sellers unable to sell. Almost each call I get are people out of the blue whose homes are no longer worth what they paid and then of course there are those that call you are in horrendous negative amortization loans with high prepayment penalties. It's been a real joy! I have a Buyer right now, who is in the process of buying one of my rentals and hoping that it closes this month after nothing but a calamity of errors from divorce to court dates for her to get her funds to now awaiting monies from her 401K. Still holding my breathe on this one.

So, in other words join the crowd of most of us and glad you are back and blogging.

Catherine,

I happen to be in the Bay Area as well, and I have been hearing a lot of horror stories for the past couple weeks. My Lender Reps have been bombarding our inboxes with guideline changes and updates on a daily basis. I actually have 2 good friends that work for New Century, which seems to be in the headlines every hour on CNN. It's been tough for them since they don't even know if they will have a job tomorrow.

One of my clients approached me over a month ago and wanted to purchase a condo in San Jose. The alarm started going off in my head when she mentioned she had a bankruptcy a couple years ago. However, based on her credit score and financial situation, it would have been possible to approve her for 100% financing at that time. I actually told her that the payment shock could be a struggle given her current financial situation. She took her time looking for a property and never found one the right one. Then, the subprime guidelines started tightening up, so she will no longer be able to qualify based on the new guidlines. For her sake, I feel that the tougher guidelines will help her and the industry in the long run.

Sure, loan pipelines might suffer a bit in the short term, but a good portion of the people that got into houses in the last 3-4 years, never should have been approved in the first place. Now that the well is about to dry up, not everybody can drink out of it.  

Hi Catherine - I've actually been telling my current buyer clients that we need to go back to their lenders now and make sure they a) still qualify for a loan; and b) still qualify for a loan they want and are comfortable with.  I don't want them to find their dream home and then not be able to finance it or worse yet, to find out while under contract that their loan is no longer available.

Of course, I also do not want to have a seller take their home off the market, under contract for a buyer that will not be able to close.

It's now up to us to remain in constant contact with the lenders to make sure things are moving along.  Of course, there's still no guarantee as we're not controlling the funds, but we still need to do all we can. And, this too shall pass.