I have posted a number of blogs over the past few months concerning the mortgage industry meltdown and the resulting impact on home-buyers and Realtors across the country; among the blog post are theses:
Although I have felt from the beginning that the problem was much more serious than many thought and proved to be more serious than I would have predicted. I knew that this problem would extend beyond the sub-prime market and that it would bring about a fundamental change in the way Realtors must act to protect their buyers and sellers. The following is a sampling of recent closures and guideline announcements from major national lenders including many of the largest in the industry during the most difficult days of the meltdown.
RFC changed their Jumbo A, Expanded Criteria, and Payment Option pricing adjustments. WAMU ceased doing any low-doc transactions whatsoever with FICO's less than 680 and LTV's greater than 65%. MortgageITdiscontinued their No Ratio, No Doc, and SISA loans for several of their products. Greenpoint stopped taking locks entirely on their Alt-A Fixed and ARM products. Wells Fargo worsened their Jumbo prices by 1 point. Countrywide changed their guidelines and pricing adjustments for their Expanded and Jumbo product lines. Indymac closed their bulk (conduit) desk. Taylor Bean and CSFB are no longer doing 2nd mortgages. Taylor also scaled back their first lien, Alt-A Fixed, Hybrid ARM and Option ARM programs. AstoriaBank tightened their guidelines and engaged in a mid-day price change on their ARM's for the worse, in spite of a nice improvement in A-paper product. CitiMortgage changed their pricing adjustments for non-agency ARM loans, and also changed the pricing structure for SIVA, NINA, and several other types of loans. More news.... Option One: 185 account executives around the country. All Option One loans have to close by the 17th of this month and fund no later then August 31st. Missing these deadlines will result in your loans being denied or changed for the worse. If you have any loans in the pipeline now, please get them closed ASAP. NovaStar: Suspended funding on Friday - expected to issue a statement tomorrow. Aegis: Stopped funding - expected to issue a statement soon. National City Mortgage: Suspended all second lien applications. This company has been one of the nation's leaders in home equity loans - big problem. Countrywide: Significantly cut back Reduced, Super Streamline, No Ratio, NINA doc types Wells Fargo: Announced elimination of Stated/Stated second liens today.
The good news is that although the sky is VERY cloudy, you can notify "chicken little" that it is not falling. In fact in time there are clearer days ahead for borrowers seeking sound financial guidance from their mortgage advisers and for Realtors seeking a more stable and reliable environment for their sellers and buyers. There was massive buying from a large percentage of Realtors and lenders to simply get the deal funded with little thought to the long term consequence of lax lending standards and relatively easy access to 100% financing to those with moderate credit scores and modest cash reserves. Lesson learned. Ok, with that being said what can a savvy, professional Realtor do to protect their client? Here are the recommendations I am sharing with my Realtor partners:
1. Partner with a competent mortgage professional that monitors daily market changes and is aware (they should be coming to you and warning you, not learning this news from you) of the fallout in the market and the changes to underwriting policies and program guidelines.
2. If you are the listing agent, require that your lending partner be allowed to speak with the buyer's lender (the buyer will have to provide permission) in order to validate the pre-approval letter. Although the lender cannot share privileged information with a third party without expressed written permission from the borrower, they can generally provide support for the borrowers ability to qualify based on program guidelines as represented. If the buyer's lender misstates program guidelines or raises any-other red flag, your trusted lender can work to resolve the issue from day one vs saving your transaction when it crashes the day before closing.
3. Do not be too easily swayed by the news about the industry in the popular press. The situation in the capital markets is indeed very serious; however, I have noticed that the popular media would lead you to believe there is no money to lend and that the dream of homeownership is no longer obtainable. Not true! A well informed mortgage consultant armed with the resources offered by FNMA, Freddie Mac, FHA, VA among others can navigate the choppy waters and find programs that work for well qualified borrowers.
4. Learn to trust your lender and support his or her recommendations when advising your clients. Work together and recognize that not every individual with the desire to own a home is eligible to do so immediately. Put together a financial coaching program in association with your lending partner to help those who do not qualify today, but are willing to work with you to correct credit problems or save money for a down-payment on a future purchase. No does not have to mean no forever and you will earn a client for life by making a strong commitment to helping less qualified individuals arrive at yes.
For more tips and best practices visit my website at: http://www.privatemortgagebanking.net/%20For For Mortgage Programs contact James A. Holmes, Director of Private Mortgage Banking, Cherry Creek Mortgage Company or by calling me Toll Free at 888-850-6100 or email at: firstname.lastname@example.org