Admin

Major Lender ELIMINATES Subordinate financing......!

By
Mortgage and Lending with First Lending Solutions NMLS ID 1325784

Wow, now here is a change that I did NOT see coming with all of the changes that are occuring in the marketplace as it relates to the constant change in the mortgage market. I've copied the text from a release that I received today.

Regardless of CLTV, First Franklin no longer offers subordinate financing. This includes both First Franklin and non-First Franklin 2nd liens with either our Core or Alt-A products.

Now granted that First Franklin is primarily a sub prime lender, as well as an Alt-A lender, but the greater concern should be that Merrill Lynch owns this company, and you can expect to see this same behavior trickle to some of the other major players such as Citigroup, Impac, Countrywide, and Bear Stearns to name a few....oh on a side note Bear Stearns recently wrote down $3 billion worth of mortgage paper that wasn't performing (meaning 90 days greater or more), and Countrywide just wrote down $388 million due to more aggressive foreclosure activity. Let's hope that it remains contained, and does not begin to affect prime lenders as well.

What you can expect for the homebuyer is to prepare for more FHA and VA financing, as well as down payment grants and other programs that help with closing costs, etc, as well as the more obvious move to larger down payments to prevent future foreclosures. Unfortunately, credit standards are being tightened so much out of an abundance of caution for the future, that we are choking in the present. I've yet to confirm this data, but I was told today that the city of Corona had 101 buy sides for the last reportable month, which was June 2007. Scary thought considering that there were over 4000 listings last I checked. Simply put, buyers that CAN buy are waiting for the better deal, and those that want to get in, but may not be fully qualified, or cannot get additional family members to co-sign for the purchase of their first home, are being forced to wait longer....can you hear investor opportunity to buy, and gain some much needed rental income? Can you guide a client into a smart land purchase, where it can become more economical to build than to buy?

Now, most of us expect this short lived tightening to be around for the next 3-12 months, but in the meantime, we need to work on giving our clients a financial check up, all the while working on credit improvement, as well as debt reduction. This too shall pass as it always does. The result should be an improved marketplace that begins to move this inventory, so that we may all go back to our normal mode of appreciation that we've come to expect, albeit closer to the 3-6% range, instead of the crazy 10-50% rate of appreciation that was unsustainable in the long haul.

Let's hope the government doesn't become overly regulatory and that as a whole the free markets play their role in stemming the losses so that lenders dont continue to tighten the noose.

 

Show All Comments Sort:
Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life
I'm book-marking this Bill, interesting post.  I've got to get to sleep, but this is definitely worth a thorough read in the morning.  Thanks for the input.
Jul 24, 2007 08:49 PM
» Bill Burress Nationwide Mortgage Originator
» Bill Burress Nationwide Mortgage Originator - Fort Myers, FL

Bill:

There has been a movement to eliminate subordinate sub-prime lending this year due to the number of defaults.  The second lien holder has no protection at all. Be prepared to sell more M.I.

Jul 24, 2007 11:26 PM
Bill Nazur
First Lending Solutions - Riverside, CA

Bill

Thankfully M.I is now tax deductible for those individuals or families making around $100K or less. Ironically, while many people may not know this, even with a second mortgage, the lender typically has an MI policy on that second when it is securitized and sold to the secondary market as a mortgage backed security, so I'm sure there is a premium issue that many of these lenders are now dealing with as it relates to their MI companies. Thank you for your commentary!

Jul 25, 2007 03:07 AM
Bill Nazur
First Lending Solutions - Riverside, CA

Jason

I'll look forward to your commentary. Bill Burress in Florida had a great comment regarding this situation.

Jul 25, 2007 03:08 AM