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100% Financing Downfall

By
Real Estate Agent with Northwestern Mutual
I am so glad!!! 100% financing is becoming history!

Don't get me wrong, 100% financing is the only way for a lot of "qualified" family to own their first home. It is the easiest way to get into owning instead of renting. In the last few years as property prices soar in record high, people are taking advantage of the 100% financing before the price no longer affordable anymore. So 100% Neg Am loan was the ticket to owning. However, on the flip side, a group of individuals take this type of financing as a quick flip to riches. They would purchase properties using this type of financing with negative amortization, and pocket the rent without paying the mortgage. So these properties are soon foreclosed. This type of scenarios was what created the down fall of 100% financing and their financiers.

For as much as it helps people buy their first home without much money down, 100% financing also put a lot of burden for Realtors as they are often not sure whether the offer they received is going to close or not. As 100% financing is getting tougher to acquire or almost impossible as more and more of these sub-prime lenders are closing their doors, it will help weed out the "able" from the "unable"; the "eligible" form the "ineligible". More people who are qualified to purchase properties and who "ARE ABLE AND WILLING" to pay their mortgage are the ones shopping for properties now. Don't get me wrong, 100% financing is STILL available but their guidelines have became much harder than before. Following is a brief summary of recent changes in the sub-prime lenders roster:

1. Fieldstone announced that it's closing 5 west coast branches including its Arizona operations. Fieldstone Mortgage also has closed their Las Vegas branch.
2. Fremont announced late Friday that they will be exiting subprime residential lending.
3. Mortgage Lender Network (MLN) "stopped funding residential loans" on 12/29 (they didn't actually say they were closing) but they have closed.
4. HMIC closed its doors on Dec 20. As part of a $100 million cost reduction strategy, Sovereign Bancorp its owner exited the wholesale mortgage market.
5. Own it Mortgage - closed its doors
6. Sebring Mortgage closed its doors
7. Axis Mortgage closed its doors
8. Oak Street Mortgage closed its doors
9. Right Away Mortgage closed its doors
10. Secured Funding closed its doors
11. Loans 123 - Not taking any more business
12. Aegis Funding (sub-prime) closed its doors (Aegis Wholesale (Conforming and Alt-A) and Home Equity are still open) for now.
13. Option One (Owned by H&R Block, Owned By HSBC)- Is Up for Sale selling off it's portfolio
14. Meritage Sold to Lime Financial
15. Mandalay - Closed it Doors
16. Southstar - AE's leaving (a good source stating company cannot meet payroll obligations)
17. Accredited - OC Regional office production at its lowest levels, rumors they may close by 1st qtr..
19. RFC - Layoffs
20. Decision One closed 6 regional centers. Division of Option One.
21. Bank of America Mortgage laid off 225 locally.
22. Countrywide Mortgage - Multiple layoffs. In talks with Bank of America about possible merger (CNN). Countrywide has also filed suit against 15 parties alleging that the company may have been tricked into lending as much as $40 million dollars (figures elsewhere say $80 million.) The defendants include eight individuals an appraiser, a property management company, and several mortgage and lending companies. According to The Wall Street Journal, another large lender, Argent Mortgage Company may also have been caught up in the scam. Some of the bad loans also appear to have been acquired by Fannie Mae.
23. Argent consolidated and let 1,000 people go. Currently for Sale Ameriquest laid off 3,800 and shut 229 retail branches after announcing a $325 million settlement with state's attorneys general for overcharging borrowers. THEY MAY NOT LAST TILL SPRING.
24. Washington Mutual - Continued layoffs. Wholesale reps offer 1 pt to realtors for referral of loans. (Cutting the throats of their Broker base! Not good for biz!)
25. Freedom .???
26. Encore Credit - closed its doors


Comments (1)

Scott Daniels Florida Real Estate 2.0. Agents Earn 100% Commission.
Florida List For Less Realty, Inc. Broker/Owner. - Cooper City, FL
Some of these companies will be back, the major difference is that new buyers will be required to ante up 3-5%. Also look towards FHA and Sellers holding 2nd mortgages as the norm....
Mar 12, 2007 11:12 PM