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It's Called "Wag The Dog" My Friend

By
Mortgage and Lending with Guaranteed Home Mortgage Company, Inc.

Yep, Whos Waggin the Dog? The PMI companies are. This week is a definitive moment in our, so called, Affordable Lending Stratosphere. All of these programs under the titles of "Emerging Markets, Gold, Flex, Affordable, blah, blah, blah"......Gone.. The Private Mortgage Insurance companies are changing the rules of the game drastically.

If you are in a Declining Market, your client must have a 720 minimum fico score to be the lucky contributor of 10% down payment of their own funds. That's right, their own funds. The days of gift money are over. Sure they can be gifted any amount beyond the customers contribution of their own funds of 10%.

If you are in a stable market, 5% down with a 660 fico score. So, we are truly in a bit of a caper my friends. It is apparent that affordable lending is at it's end. What about FHA? you say..... January 1st, that down payment becomes 3.5% for the borrowers contribution and we all know that down payment assistance programs are gone.

To keep our economy going, slashing these programs is not the answer. The PMI companies are looking at loss mitigation. An interesting dilemma that they are in, if you ask me. How did they get here? Well, they insinuated insuring Expanded Criteria Programs with Fannie and Freddie a long time ago. They were allowing all of these high risk loans into their pipelines. All under the guise of Affordable Lending.

If you have children or grandchildren, you can feel truly uneasy now knowing that there is no way that the, so called, "American Dream of Homeownership" is going to happen. We are looking at more homeless people and more slum lords to make their way into the mix. How can we move forward if people cannot afford to find a place to live?

It's called, Wag the Dog, and I don't like it at all...........

Comments (6)

Eric McGowan
Moody, AL

Julie, more relaxation of programs is bound to come. With the increased rates already for MI on conforming loans something will soon give. It is odd how FHA, VA, and USDA have become the mainstays of limited to no down payment borrower's now --- regardless of credit score.

Nov 18, 2008 02:23 PM
Julie Hite
Guaranteed Home Mortgage Company, Inc. - West Bloomfield, MI

Well, you are right Eric, however credit score is a factor. FHA is minimum of 580 and VA is now 660. Have you tried to get a manual underwrite done lately with non-traditional credit trades? It isn't happening. So USDA really is the only affordable option, but you have to be living in the sticks. More relaxation? What do you mean? Things will loosen up? I see that at about 2012 if we are lucky.

Thanks for the comment though!!

Nov 18, 2008 02:33 PM
Paul McFadden
Responsive Pest Control - Seattle, WA
Pest Control, Seattle, WA.

Julie: Raising the conforming limits should help. Yes, things are tight but I expect sometime next year for things to ease up a bit. They've been tight for a while (August 2007) and it stands to reason things will improve soon.

Nov 19, 2008 08:26 AM
Eric McGowan
Moody, AL

Julie, did not mean anything otherwise. 24 month history, regardless of situation, is being scrutinized along with income and all information in a file notwithstanding the score. My boss just had a denial on a 668 scored borrower, rate/term refi, because they saw a 1/30 on the credit bureau from January of 2007. The file should be manually underwritten because it gave findings of refer/eligible but the underwriter chose not to accept the file.

 

Nov 19, 2008 12:27 PM
Anonymous
Anonymous

Julie,

First off I hate to say FHA isn't at a 580 max. The lenders you are working with may be imposing a 580 max but FHA can still go to 500. Add the VA at a 660 max and I'd just have to suggest you get some new lenders! FYI- I've done VA in the last month down to 617.

Same goes with that scenario Eric. You didn't mention if the loan was conventional or govie but as long as there is a real monthly payment benefit, with a good mortgage repay history, that file should have been do-able. So many factors to consider though...

Do know although low down conventional lending is all but gone, govie programs are picking up the slack. We are just taking a huge step back in time to when these programs were all we had. They did us well then, and will do us well now.

Retro is always in, right? :-))

Gerry Suarez, Jr.

Your FHA Loan Pro!

Nov 20, 2008 01:21 AM
#5
Gerry Suarez Jr.
New American Funding NMLS 6606 - Orlando, FL
FL Mortgage Guru

Julie,

First off I hate to say FHA isn't at a 580 max. The lenders you are working with may be imposing a 580 max but FHA can still go to 500. Add the VA at a 660 max and I'd just have to suggest you get some new lenders! FYI- I've done VA in the last month down to 617.

Same goes with that scenario Eric. You didn't mention if the loan was conventional or govie but as long as there is a real monthly payment benefit, with a good mortgage repay history, that file should have been do-able. So many factors to consider though...

Do know although low down conventional lending is all but gone, govie programs are picking up the slack. We are just taking a huge step back in time to when these programs were all we had. They did us well then, and will do us well now.

Retro is always in, right? :-))

Gerry Suarez, Jr.

Your FHA Loan Pro!

Nov 20, 2008 01:24 AM