What is happening with the subprime mortgage market?

Whether I am deal with customers here in Tampa, Florida or in Michigan, I am being asked this question on a regular basis..."What is going on with the subprime mortgage market?"

 First, what is a subprime mortgage?  For anyone who hasn't been in business for the past couple years, it was a great tool for getting "credit challenged" borrowers into a mortgage.  Mortgage brokers were able to approve loans to borrowers with credit scores down to 560, 1 day out of bankruptcy or foreclosure and not proof they could pay a mortgage!  Was it right?  The majority of the time, no.  That is my opinion.  Mortgage brokers should not have set consumers up for failure.  Now, I have to say with that there are times, when it is a good thing.  For example, a borrower just went through a divorce, the ex did some major damage to their credit.  The borrower needs a fresh start and is on the road to recovery.  In this case, I can see how the use of a subprime mortgage can be a "band-aid" for a couple years until this borrower could get into a conventional mortgage.

So, what has happened?  Since 2004, mortgage brokers have been writing these loans.  Now, borrowers are beginning to default on the mortgage, in other words, these loans are going bad.  In turn, mortgage investors are going out of business faster than we can keep up.  Check out this site:

http://mortgageimplode.com/

What does this mean to everyone else?  Most importantly, our mortgage guidelines are changing daily!  Our underwriters are becoming more strict and what we were able to do a couple months ago, we can no longer approve.  I believe you will see more borrowers who need education and guidance prior to getting a mortgage.  They will need to get mortgage ready!  I belive you will see more borrowers utilizing government loans, such as FHA loans, in order to get approved.  I believe you will continue to see mortgage brokers having limited resources for getting "credit challenged" borrowers into a home with zero down payment.  I believe this is a cycle that happens regularly and will be a good clean-up for our market.  I believe, in the big picture, this is a good thing for our borrowers out there!!

If you know someone who needs education on the loan process and how to get "mortgage ready", please call me and we can discuss the best way to get them on the RIGHT track!