Countrywide New "Soft Market" Policy Changes

By
Mortgage and Lending with Kris Krajecki - FOX VALLEY MORTGAGE - Huntley, IL

I recieved this e-mail and thought I'd pass it along...

Looks like teh declining housing market is here to stay for awile....and the lenders know it!

As you are well aware, 2008 is forecasted to be a challenging year for the mortgage industry, characterized by a declining Housing Price Index in a wide variety of metropolitan markets. In the context of the prominent threat to our industry of collateral values falling below outstanding loan balances, mortgage professionals must strive to ensure that borrowers do not take on loans that they do not have the ability or economic interest to repay.

Because of these market conditions, as well as policies implemented by Government Sponsored Enterprises and Mortgage Insurance agencies, Countrywide®, America's Wholesale Lender® is adopting new Soft Market policies designed to help serve qualified borrowers in markets which are either declining or projected to decline in 2008.

Impacted markets across the nation have been categorized, with Category 5 being the highest risk for declining market value and Category 1 markets currently demonstrating more stable market values. Those counties in a higher risk category are subject to additional guideline restrictions as described below. Click here to view a list of the counties currently attributed* to Soft Market categories 1-5.

The following Soft Market policy became effective January 18, 2008:

Conforming, Non-Conforming, Expanded Approval (EA), and Conventional Bond loans:

Soft Market Category 4-5 loans

Maximum financing will be reduced by 5%

Example: Maximum financing per Countrywide's Loan Program Guide allows for 95% LTV. Loans in Category 4-5 will be limited to a new max LTV of 90%.

Soft Market Category 1-3 loans

Maximum financing will be reduced by 5%, only if the appraisal or appraisal review indicates any of the following:

  • Declining Market
  • Oversupply
  • Marketing time over 6 months
For the above categories, if the loan is already 5% below the maximum allowable financing, no further reduction is required.

Home Equity**

Soft Market Category 5 loans

Maximum financing will be reduced by 10%, unless the loan is already 10% below the maximum allowable financing

Soft Market Category 4 loans

Maximum financing will be reduced by 5%, unless the loan is already 5% below the maximum allowable financing

Soft Market Category 1-3 loans

Maximum financing will be reduced by 5% (unless the loan is already 5% below the maximum allowable financing) if the appraisal or appraisal review indicates any of the following:

  • Declining Market
  • Oversupply
  • Marketing time over 6 months
Products / Programs Not Impacted

FHA / VA
Rural Housing
Bond programs using government or Rural Housing loan programs
Reverse Mortgages
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Rainmaker
65,048
Barry Shapiro
Broker-Associate - Camarillo, CA

Kris ~

 

I have a client looking for this specific information on changes in mortgage loan programs... I will forward along the link to them this evening!  Thank you, sir.

Jan 26, 2008 05:20 PM #1
Rainer
4,684
Jay Reifert
Excel-Exclusive Buyer Agency - Madison, WI

Hi Kris,

Thanks for posting this great information.  I've been wondering, for quite some time now, how lenders were identifying properties that were in declining markets.  I'm not at all sure what Countrywide is using as a data source, in order to establish their categories...but am happy that there is at least something out there that demystifies the declining market situation, a little bit, even if it is just with one lending source.

In fact, I was specifically looking for information on Countrywide's new(er) appraisal policies, so I did a Google search on the phrase, "countrywide, appraisal policy" with your post being the second organic search result overall.

That said, I do wonder about a few things.  Maybe, as time goes on--and more people become aware of the issue, and your post--there will be some answers.  I'm wondering:

1)  What is the ultimate data source on establishing what property is in a declining market?

2)  Are they only concentrating on larger urban markets?  I wonder this, because that's the way it is looking for Wisconsin...when I know full well that several small towns/cities within my trade area have had far more in the way of problems with declining values than--for instance--Madison, Wisconsin.  Are those smaller communities not going to be affected?

3)  For "Soft Market Category 1-3 Loans" how are they determining if there is an "Oversupply" of property?

4)  For "Soft Market Category 1-3 Loans" how are they determining if there is a "Marketing Time Over Six Months"?  This one could be very interesting, depending on how marketing time is interpreted.  What if the seller has changed listing agencies, but the cumulative marketing time is nine months...four with one company, five with the other?  What if the property has been listed and expired out to make it appear fresher on the marketplace...say every four months?

One thing seems certain, to me--and I don't list property or represent sellers...all I do is work for home buyers--listing agents need to be excruciatingly aware of this "Marketing Time" qualification...and be advising sellers to price their properties as correctly as possible, or their sellers may be cutting their own throats with lower downpayment buyers who can't afford to pony up an extra five percent down.

I think a lot of people--sellers, listing agents...and lower downpayment buyers--may be in for some very unpleasant surprises, with this marketing time over six months adjustment bugaboo.

Thanks, again, for putting this information out there.

Jay Reifert, Broker/Owner  --  Excel-Exclusive Buyer Agency  --  Madison, Wisconsin

Apr 18, 2008 11:46 PM #2
Rainer
4,684
Jay Reifert
Excel-Exclusive Buyer Agency - Madison, WI

As I looked over the information again, a few minutes after sending my message above, I did notice that the article mentioned, "Counties".  In looking at the chart, though, it showed cities.  That said, the chart does start each line category with the term "MSA" which I'm figuring either stands for Market Service Area or Metropolitan Service Area...or something of the like.

So, with that in mind, here are a couple more questions:

1)  What does "MSA" mean?

2)  What defines an "MSA"?  Is it a county, or something more nebulous?

Jay Reifert, Broker/Owner  --  Excel-Exclusive Buyer Agency  --  Madison, Wisconsin

Apr 19, 2008 12:13 AM #3
Rainer
4,684
Jay Reifert
Excel-Exclusive Buyer Agency - Madison, WI

Guess I should have done a bit more research before asking.  "MSA" is Metropolitan Statistical Area.  Here's a link that helps explain...

http://en.wikipedia.org/wiki/United_States_metropolitan_area

I'm still trying to find out more about how far the Madison, Wisconsin MSA extends.  I see it on the map, but that doesn't tell me all that I want to know.

[Not that it will matter to any outside of Wisconsin...but, I found this after I had originally posted this message:  http://dwd.wisconsin.gov/oea/msa_map.htm ]

Jay Reifert, Broker/Owner  --  Excel-Exclusive Buyer Agency  --  Madison, Wisconsin

Apr 19, 2008 12:49 AM #4
Anonymous
Ryu

http://www.ofheo.gov/  This site might help demystify HPI

May 14, 2008 05:11 AM #5
Rainmaker
67,920
Denise Allen
Resh Realty Group - Chesapeake, VA
Realtor@ Chesapeake, Hampton Roads

Oh more stuff to fill my head with.  I let the lenders do that and tell me what the buyers qualify for.

May 14, 2008 05:32 AM #6
Rainer
46,595
Debbie Salmon
keller williams - Vancouver, WA

Good post and good information to have i love the article

Jan 01, 2009 01:55 AM #7
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Rainer
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Kris Krajecki

Mortgage Broker Huntley, IL
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