Important Lending Changes...

Them Loan Programs, They Are A-Changin'...

There is significant activity going on behind the scenes in the lending markets right now.  Earlier in the year, the "subprime" markets experiences some major upheavals as the Wall Street buyers of these subprime loans - which were typically made for borrowers with weak credit or other factors that made the loans risky - began to stop buying them.  Worse for the subprime originator lenders, the Wall Street buyers of these loans began exercising their "buy back" rights - meaning they could force the subprime originator lender to take back any loans they didn't like.  And they started to "not like" a bunch of them.

Think of it like this:  In the movie "It's a Wonderful Life", there's a scene involving a panic-driven run on the "Building and Loan".  Jimmy Stewart is facing a mob of investors demanding their money back.  Stewart explains that he doesn't have the money to give back because he's loaned it out to other families so they can buy homes with it.  He's finally able to calm the crowd down by using his honeymoon money to give each investor a little bit of their money back until things get better.

Stewart was fortunate to have such understanding investors who had confidence in him.  The subprime originator lenders didn't have such understanding investors.  Wall Street threw millions in loan buy-back demands on them all at once and when they didn't have the money to pay - because they had loaned it to other families to buy homes with - they went out of business.  Over 50 major, nationwide subprime lenders folded earlier this year (these are the places where someone like me gets money to fund my clients' loans, so with so many lenders that I used to rely on suddenly gone, it limits my ability to service my clients needs).

Well, the same thing is happening right now for "Alt-A" originator lenders.  "Alt A" is the category right above subprime and it deals with many excellent credit borrowers who have difficulty proving income.  A popular "Alt A" loan is a "Stated Income" type of loan, where we "state" on the application how much money the borrower makes, but we don't verify it.  With excellent credit, you were allowed to do this.

Right now, it looks like "Stated Income" loans could be completely eliminated or severely restricted as the "Alt A" firms begin to be assaulted by Wall Street buy-back demands.

If you are a Stated Income type of borrower, please contact me right away to discuss your future plans.  Many of you may be in loans that you are planning on refinancing in the near future.  If so, I would encourage you to consider doing this as soon as possible so you'll still have programs available.

It is a volatile market place right now.  But there is another "It's a Wonderful Life" scene to keep in mind:  Mean ol' Mr. Potter has Jimmy Stewart in his office and is offering him a job.  Why?  He explains to Stewart that because Stewart kept his head during the bank run and was able to guide his clients through the mess, Potter couldn't beat him.  I'm here keeping my head, and I'm here to guide you through this mess.  Please don't hesitate to call and discuss your situations with me.  And I firmly believe that there will be opportunities in this volatility for those of us who can keep our heads and look for them.                                                                                  

Glenn - 253-446-3719