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State of Mortgage Lending on Friday 09/26/08- not all doom or gloom

By Gerry Suarez Jr.

Mortgage and Lending with New American Funding NMLS 6606 310298

September 26, 2008 04:31 AM

I've been speaking to Realtors and customers all week about the "rescue plan" and what it means to them. With all the negative talk in Washington it's too easy for us to assume getting a new mortgage loan is impossible. Please don't succumb to those thoughts. Despite the turmoil, mortgages are available and not just for the people that don't need them!

FHA/VA, Rural Development and even conventional financing is still available and business is as usual. Bad credit risks have been denied credit (as they should be) but these loans are still available, at great rates, for most decent buyers. Most importantly sellers seem to be lowering their expectations because of the bad press, and GREAT deals can be had.

People with credit scores of 580 or less will have a challenge finding loans. Rural development still requires no credit explanation with a score of 620 or better and FHA/VA are still approving loans with 55% debt ratios and higher so there is still considerable flexibility on the government lending front.

Don't miss out on a good opportunity thinking there is no financing. Mortgage money comes from many sources and good investments are always in demand!

Gerry Suarez, Jr.

Your HUD Loan Pro!

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Ron Withers ----Retired Mortgage Professional

Kissimmee, FL

Gerry

Thanks for the reassurance! With the industry changes that you and I see vertually everyday this has been another big "head scratcher".

Oct 01, 2008 03:33 PM

Gerry Suarez Jr.

New American Funding NMLS 6606 - Orlando, FL

FL Mortgage Guru

Ron,

My phone just about died last week with all the uncertainty but this week it's been ringing consistently with new business. People will always need housing and we are the most critical (sorry Realtors!) component in that equation. It's too easy to dwell in the negative- let's just go out and write some deals!

Hope all is well down your way. We really should get together for lunch someday...

and I know I still owe you the Lake County SHIP overview. The process has been in some flux here lately and I am awaiting some new changes (what else is new, eh?).

Gerry Suarez, Jr.

Your HUD Loan Pro!

Oct 02, 2008 02:50 AM

Pam Simpson

Bob Leigh & Assoc., LLC - Senatobia, MS

GRI, Broker-Assoc.

All the talk on the news made me wonder if lending had come to a screeching halt so I contacted a lender I work with to ask if they are running into any funding problems (more than usual). He told me they are not. Thanks for writing this.

Oct 02, 2008 02:59 AM

Gerry Suarez Jr.

New American Funding NMLS 6606 - Orlando, FL

FL Mortgage Guru

Pam,

Thank you for chiming in. Lending is being scrutinized more heavily because of the state of the housing market. To say there is a lack of funds is ridiculous when the government is already buying/backing just about every loan being written (FNMA/FHLMC/FHA/VA/RD). Home values have fallen in many markets enough to promote affordability again. When the price reflects a deal, there wil be buyers; and we will be ready to write them a loan as long as they are a good credit risk!

Gerry Suarez, Jr.

Your HUD Loan Pro!

Oct 02, 2008 03:14 AM

Ron Withers ----Retired Mortgage Professional

Kissimmee, FL

Pam & Gerry

I guess that I most often will have an opinion (right or wrong) on most things related to our respective industries/professions. While I do not totally disagree with Gerry, IMO, there are in fact some liquidity issues in the mortgage lending market. It may not always be apparent or public knowledge but just look at the huge "mortgage mess" picture with delinquencies, defaults, foreclosures and the number of lenders that have failed, imploded or withdrawn from certain aspects of their respective markets. Two recent bank failures (WaMu and Wachovia) are among other things, liquidity issues.

In the grandios scheme of things lenders deal with liquidity issues somewhat subtly by exiting a market (wholesale or retail), become uncompetitive with rates and terms and maybe axe certain mortgage products. In doing these things they slow the flow of business or in another way not putting out the cash. Every lender, again every lender is re-inventing their business model and liquidity is a factor to some degree or another.

Of contemporary note...consider Chase (wholesale and retail). They are revamping their business model, consolidating operations centers and will ultimately let several employees go, Here in
Florida, they just axed all lending for condos, townhouses, second homes, investment properties, 2-4 unit, etc., basically indicating that risk evaluation was the reason. These are sweeping changes and impact the availability of funding for many well qualified buyers. While I agree with this to a great extent, I also know that with stricter guidelines and solid underwriting these issues can be mitigated. Although they have tried to reassure their correspondent lenders/broker that they will not exit wholesale operations these are extraordinary and trying times. However, intent can now change from one day to the next.

Oct 02, 2008 11:55 PM

Ron Withers ----Retired Mortgage Professional

Kissimmee, FL

Gerry:

I am game for the lunch thing, becoming better acquainted with one another and the sharing of some opinions and philosophies. Maybe in the next 1-2 weeks? We'll chat! Chao.

Oct 03, 2008 12:09 AM

Gerry Suarez Jr.

New American Funding NMLS 6606 - Orlando, FL

FL Mortgage Guru

Ron,

Your opinions are born from experience, that means they always have merit. My stance is simply that our problem is not based in liquidity, it is based in asset valuation. The money to invest is still out there, if the asset is worthy of risk. Trillions of dollars have been lost in bank's lending abilities but the end investor for all our mortgages is the government and they (so far) have still been able to sell their MBS (mortgage backed securities).

You site Chase as an exellent example. It's not their lack of liquidity that is causing these program changes, it's the risk. Said another way, we could give Chase the keys to the Treasury and they still wouldn't be lending on these risky types of loans.

That's why I personally don't feel the "bailout" will help. It provides capital for other investment, and hopefully banks will have the stomach to lend. We are deep in an all out market contraction though, so lending standards will be tightened. Until we reach the bottom of housing, I don't think that will change. That's why my opinion is we try to solve the problem from the bottom up- see this post.

but in the end, mine is just another opinion that can be as dangerously wrong as any other...

Thanks for your .02- always appreciated! Next time I'm going thru your way I'll give you a call and please do the same if you're traveling up north.

Gerry Suarez, Jr.

Your HUD Loan Pro!

Oct 03, 2008 02:14 AM

Donna Mitchell- Middle Tennessee's Best Banker

Brentwood, TN

My opinon is that if Chase continues to take this overly conservative stance, this ludicrously conservative stance, they will not be a major player in the banking industry in 10 years, but will have to consolidate eventually. Chase appears to be trying to time the "risk" market and acting like an amateur investor by curtailing their lending to the degree they have. Calculated risks have to be taken right now. Does anyone really think that the condo market won't eventually snap back in Florida? sooner or later the inventory will be absorbed and prices will come up again as it is a desireable retirement destination. To stop all condo lending is simply rediculous.

Oct 11, 2008 05:23 PM