On July 30 of this year, the investment rating agencies lowered the ratings on funds that held certain mortgages. The result was investors pulling back on buying such securities that held questionable mortgages. What happened next was front page news, and still is today.
Lenders quickly realized that there was no market to sell their loans, so they stopped offering them, simple as that. What started to be a subprime crisis, turned to other loans that carried higher risk. Some loans remained on the books in early to mid August, but the rates went up 2 points, basically pushing their product off the market.
As lenders have reworked their guidelines to calm investor nerves, and provide higher quality loans, Wall Street has begun to buy mortgages again, though not at the profit margin of a few months ago. Still there are many loans that have yet to be purchased, and we all know that there is an end of the runway for all banks and lending instutitutions.
The big players are holding mortgages, hopeful that they will be sold soon, and others have simply folded under the pressure. Good, solid companies like American Home Mortgage have been forced out of business simply because there was a very sudden stop to all mortgage purchases in early August. They simply could not weather the storm and hold mortgages and millions per day, for more than a few days, so they closed.
For the consumer, it is important to know that today, more than ever, it is crucial to work with a professional, not a loan officer. You need to know that they are full time in the business, have access to real time market conditions, and are CERTIFIED.
Call me for more insight about this market. 831.425.1250