Mortgage Times are a Changing

Oh the difference a few months can make. I am currently sitting with 3 loans on my desk that only 3 months ago would have been closed and funded in two weeks or less. Today I'm not sure if I will be able to find any lender who will take them. Here is a couple examples of what I'm talking about;

One borrower has a 615 middle credit score, which is not very good but could be worse. They have a good job and make decent money and they have never been late on their mortgage which they have had for about 17 months. They called me to see about refinancing to 100% and taking some cash out to make some improvements on the home. In the old days (3 months ago) anyone with a credit score of 580 a good job and income could get 100% financing, with cash out, in a heart beat. Today after exhausting 11 lender resources, I finally had to call the client and tell them that the best I could do was going to be 95% and the interest rate was going to be almost insulting. Fortunately this client is not desperate for cash and can afford to wait a month or two until their credit score goes up to 620 points, they new floor for 100% financing.

Another borrower I have been struggling with has a 649 credit score but is self employed and has had 1 mortgage late in the past 12 months. We are able to use bank statements as proof of income so this loan is treated as "full doc" which means it gets the same consideration as someone who has a full time w-2 job. In the old days most of the 75 lenders I have access to would have taken this loan without hesitation, but in this new world, this loan has been accepted but then "kicked to the curb" twice. The borrower is a little frustrated and I can't blame them. Trouble for mortgage officers in today's market is that compared with this borrowers last experience, I look like I'm incompetent. What looked like an easy loan 60 days ago has turned into another mortgage nightmare for both the client and me. Originally the client wanted a 100% refinance with cash out, we are down to our last lender who will even consider it at 95% which leaves the borrower far less cash then they really want. We will get the loan done but it has not been a pleasant experience for any one involved.

This interim period that we are in now, between when things were easy for everyone and the new way where the few sub prime lenders that are left are seriously tightening their belts, is awkward to say the least. Those of us in the mortgage business have to learn to look at each loan application with more discretion as we navigate the new and ever changing guidelines that will seriously change the home finance landscape over the next few months.

Hopefully everyone can hang on for the ride.