The Troubles of Lending

By
Mortgage and Lending with Loan Link Financial Services
How many of you are finding it harder and harder to get your buyers and clients to qualify for a mortgage these days? It seems like 100% financing programs have disappeared and programs for First Time Homebuyers are depleting as well. Companies like Countrywide did away with their 100% financing and other big lenders are following suit. The good news is that there are still many 100% lending programs that are available to buyers and grant/silent 2nd programs to assist homebuyers get into their home. If you are running into these scenarios please post them and lets discuss whats going on.
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Rainer
8,611
D'Ann Faught
Dallas, TX

There is a lot of misinformation going around right now about the mortgage industry...Below I have copied a great article from the Mortgage Bankers Industry that is really interesting...I am still getting 100% financing through big companies, the guidelines are just stricter.  Check out these facts from the Mortgage Bankers Association (these are stats as of April 2007).

The Facts About Mortgage Lending

FACT: The homeownership rate remains near record levels, at 68.9 percent.

FACT: 35 percent of homeowners own their home outright; 49 percent are in fixed rate loans.

That leaves 16 percent of homeowners with adjustable rate products. Only 5 percent of

homeowners are nonprime borrowers with adjustable rate loans.

FACT: ARM products have a long and successful history and nontraditional products have allowed

many first-time homebuyers to own their homes.

FACT: About 1 percent of all loans are in the foreclosure process, well within historical norms, despite

the record number of homes sold in the last 3-5 years. This is down from the post-recession

peak of 1.5 percent.

FACT: Three out of every four loans that enter the foreclosure process do not wind up as a foreclosure

sale, either through the homeowner curing the delinquency, a workout between the lender and

borrower, a refinance or a voluntary sale of the home.

FACT: The number one cause of delinquencies and foreclosures is job related, as we can see in

the Midwest, which has seen a significant number of manufacturing jobs lost.

FACT: There is no evidence that the increased delinquency and foreclosure rates are the result of

hybrid ARMs or nontraditional products, such as interest-only and payment-option mortgages.

FACT: Historically, delinquency rates tend to peak in the first 3-5 years after origination. With more

than half of all outstanding loans less than three years old, it stands to reason delinquency

and foreclosure rates may rise as they age.

FACT: Nonprime borrowers have always had a higher delinquency and foreclosure rate. Nonprime

borrowers are also a higher share of ARM borrowers, thus it stands to reason that nonprime

ARMs have a higher delinquency rate.

FACT: Lenders want to lend money to borrowers who are willing and able to pay the loan back on

time. Each time a foreclosure sale occurs, it typically costs a lender 30 to 50 percent of the

outstanding loan balance, so everybody loses when a home goes into foreclosure - the

borrower gets a black mark on his or her credit, the lender and investor lose and the

community loses.

FACT: Between $1.1 trillion and $1.5 trillion of ARMs could potentially reset in 2007. Of those, $600

billion-$700 billion will refinance prior to or at reset, thus the borrower will not face a payment

increase. The remaining $500 billion-$800 billion will actually reset. It is important to note,

however, with short term rates rising, more borrowers are moving to fixed rate loans.

FACT: There is continuing competition among companies given the current environment, and that is

good for consumers, especially those who "shop for their loans." Homeloanlearningcenter.com

is a valuable resource for consumers who want to learn more about the homebuying process.

FACT: The marketplace is working. The volumes on many nontraditional products

have not been this high before. As a result, investors, rating agencies and

lenders have tightened underwriting standards.

* Data as of April 2007

May 02, 2007 08:36 AM #1
Ambassador
749,468
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Nick.... just be careful of what you talk about and how you talk about it. I am not trying to sound negative here, but I am both a banker and a broker. We sell some of our loans to Countrywide and I just did a 100% loan with them. It falls under the 'my community' program. 

In regards to silent seconds, that is fraud. There have been 100's of topics on this. A 2nd has to be recorded legally.

Again, I am all about educating the consumer, but misleading them down the wrong path, I will stand up to it. I hope this helps some.

                                                                                                              jeff belonger

May 02, 2007 08:37 AM #2
Rainmaker
107,837
Doug Capps
Guaranty Bank & Trust Co - Hernando, MS
MMS, CLO, CRMS

Hey Nick,

If you're referring to coventional conforming, you have the Flex and My Community 100's.  I always try to put a client requesting 100% on one of those programs before I even look at sub-prime (that is, if they meet those guidelines).

Regarding sub-prime, there are many companies out there that are still offering 100% programs and allowing for FTHB's.  These lenders have tighted in regards to credit score and guideline requirements.  Check www.wierdloans.com and www.scotsmanguide.com - those are two good online resources (and yes they are sometimes incorrect, but it will at least guide you in a direction).

May 02, 2007 08:49 AM #3
Rainmaker
592,276
Neal Bloom
eXp Realty - Weston, FL
Realtor CRS-Weston FL Real Estate

Hey Nick,

Good post maybe too late for some.

You should read this post I put up yesterday you might like it or you might hate me.

http://activerain.com/blogsview/88910/FIRST-BLOG-PART-II

May 02, 2007 09:09 AM #4
Rainer
96,051
Jason Price
Mortgage Financial Group, Inc - Eustis, FL

Nick,

I have to agree with the others.  100% does stilll exist and is readibly available for us to offer to our clients.  Yes, some of the lenders are tightening their guidelines but that does not mean that the programs no longer exist.  And as Jeff mentioned, silent seconds are fraud.  I suggest you do a search on the blogs for silent second mortgages to see the discussions.

May 02, 2007 09:10 AM #5
Rainer
1,085
Nick Harris
Loan Link Financial Services - San Diego, CA

Jeff-

 Appreciate the response. I too am all about educating the borrower. I also am a banker and a broker. And yes Countrywide no longer has a product that goes to 100%...My Community is not their product, it is a Fannie Mae product. As for silent 2nds...they do exist. Maybe they are termed different where you are from but in California there is a program called CalHFA (FHA product) that uses silent 2nds for downpayment/closing cost assitance. The borrower receives a loan for 3% and no payments are made. The loan grows at 3%-6.875% simple interest until the borrower sells or refi's. It is a great benefit that I use for FTHB. They are not Frauds and I hope you are not telling your borrowers that.

Doug-

 Thanks for the post. I also use the My Community and Flex program. They work great and they offer such great rates. Have you had good experiences using those websites you listed? Our subprime guru on my team uses wierdloans and says it has changed some since the subprime downfall.

May 02, 2007 09:12 AM #6
Rainmaker
592,276
Neal Bloom
eXp Realty - Weston, FL
Realtor CRS-Weston FL Real Estate

Jason,

I agree with you.

You know what? They do exist and so does the crap up their butts, but I can tell you even with great credit and great income the deals are still falling and the loan officers are lying.

You should read this http://activerain.com/blogsview/88910/FIRST-BLOG-PART-II

May 02, 2007 09:14 AM #7
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans
Nick... for what it's worth... I just got one done with Countrywide. is this something that just happened in 24 hours?  In regards to the the FHA product, that 2nd is still recorded, right?
May 02, 2007 09:17 AM #8
Rainer
1,085
Nick Harris
Loan Link Financial Services - San Diego, CA

I think many of you are mis-interpreting what i am saying.

 Silent 2nd I am referring to a 2nd loan that sits behind a first with our CalHFA progam. It is a 3% loan and it grows at simple interest. No payments are made on it, it becomes due when teh borrower sells or refi's. It is used for DP and Closing cost assistance. I hope this clears up your Fraud comments.

 Also I am wel aware of many 100% programs available, i merely wanted to start a post to talk about the subject, not to educate me, because i already know everything you guys are writing. I want this to educational to the people who do not know already. I want this to be a good resource for fellow LO's/Mortgage Bankers...etc

Thanks everyone thus far for your input but lets try and change the direction with the posts from here on out.

May 02, 2007 09:17 AM #9
Rainer
1,085
Nick Harris
Loan Link Financial Services - San Diego, CA

Jeff-

Yes the 2nd has to be recorded. As far as i know, i talked with our AE from Countrywide and they told us month ago they were ridding of their 100% program. THey may be brokering the 100s now, or they came out with a different product to compensate for the loss of the one i was told about. At any rate, they can still do them but I simply wanted to show that Big Names in the Industry are changing also.

May 02, 2007 09:21 AM #10
Rainmaker
107,837
Doug Capps
Guaranty Bank & Trust Co - Hernando, MS
MMS, CLO, CRMS

Nick,

Those websites are really hit and miss, but I do use them when I'm hunting for a lender depending on the sub-prime situation.  We have many sub-prime lenders, but there are always lenders that do something different than the rest.  As long as the information is kept up-to-date on those sites, it does help from time to time.

May 02, 2007 09:30 AM #11
Ambassador
749,468
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Nick.....   2 things. If it's recorded, it's still not silent. I understand what you are saying. And I don't care what lenders in Cali. call it, it's still not called a silent 2nd. That is fraud under the lending guidelines. Part of educating the consumer is calling it what it is and not terms that we use loosely. Just my opinion.

On the 2nd issue at hand. You are going off of what an AE is telling you and that you haven't experienced this first hand. I don't care if Countrywide sold the loan, they are still doing them. Not for nothing, but this is somewhat misleading the public. Starting a conversation is one thing, knowing the facts first hand and not 2nd hand is how rumors get started. 

And sorry if I came off strong, educate all you want. But as you can see in here, some of this take this seriously. This is not a mortgage board that just shoots the crap, like so many that I have tried do. And then you go on to state in a follow up comment... THey may be brokering the 100s now, or they came out with a different product to compensate for the loss of the one i was told about. At any rate, they can still do them but I simply wanted to show that Big Names in the Industry are changing also.

 But in your post you stated.... Companies like Countrywide did away with their 100% financing and other big lenders are following suit.

Sorry, but those are 2 totally different statements, no matter how you slice it.

There is one person on here telling people that you can do 100% FHA financing because of Nehimiah.... but he doesn't mention this program. There is no 100% FHA financing. You can get to the table with no money out of your own pocket, but it's not the same.  

May 02, 2007 09:32 AM #12
Rainmaker
592,276
Neal Bloom
eXp Realty - Weston, FL
Realtor CRS-Weston FL Real Estate

Jeff,

The lender I mentioned in my post originally told me the 100% financing was not a problem and it was what he called a straight Fannie Mae, yet there ended up with a problem because the guys income was too high. What is up with that statement?

May 02, 2007 09:40 AM #13
Ambassador
749,468
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans
Neal... I don't want to hijack Nick's post. I still need to read that post, but they obviously ran it with income later?  Or he didn't calculate the income incorrectly and the underwriter changed it. Once an underwriter verifies the findings of an approval, there is no reason for them to use that answer. I'll take a look at it soon.
May 02, 2007 09:43 AM #14
Rainer
1,085
Nick Harris
Loan Link Financial Services - San Diego, CA

Jeff-

 Its obvious we are not seeing eye to eye. I merely wanted to make a statement that companies such as Countrywide got rid of THEIR product for 100% financing. They may still DO the loans, but it doesnt mean that they are USING THEIR PRODUCT.

As far as the AE, he works for Countrywide...how is that not 1st hand? I went to him for a loan, and they didnt have that product....I am not sure where you were going with that response, but for clarification purposes if that is considered "hear say" than eveything i hear from my AE's is not necessarily true? This was not a rumor and if it was why would Countrywide's AE tell me otherwise...sorry to confuse you but these are FACTS not RUMORS.

May 02, 2007 09:43 AM #15
Rainer
1,085
Nick Harris
Loan Link Financial Services - San Diego, CA

Neal-

 If his income was too high there must be income restrictions on the program...i feel that the program was My Community where there are income restrictions. If its in a Fannie Mae neighbors area than there are no income restrictions

Jeff-

Dont worry about hi-jacking, that is what this post is all about...i want to put questions on the table and answers as well...no worries keep them coming

May 02, 2007 09:46 AM #16
Rainmaker
592,276
Neal Bloom
eXp Realty - Weston, FL
Realtor CRS-Weston FL Real Estate

Nick,

I do not mean to hijack either but since you answered me, how come the guy was approved electronically by the underwriters and after 2 extensions now come up with this, don't you think in you professional opinion there should have been a better way for them to find out before the 12th hour?

May 02, 2007 09:50 AM #17
Ambassador
749,468
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Neal... as I explained... there are many reasons.  #1... the loan officer could have inputed the wrong info. The processor could have done the same. The underwriter could have caught it at the end. Remember, what you put into DU, that gets looked at electronically, has to be correct and will be verified.

Let me ask you a question Neal. Who is telling you about what happened?  The extensions, etc etc.

Nick....  for what it's worth, all I am doing is pointing out your original statement. Countrywide is still doing 100% loans. I don't care what you call them. Your original statement says that they stopped doing them, period.  

                                                                                                             jeff belonger

May 02, 2007 10:30 AM #18
Rainer
53,146
Ron Withers ----Retired Mortgage Professional
Kissimmee, FL
There are some good exchanges and points here. But in regards to the "True" First-time Home Buyers programs...they are not being depleted or going away.
May 02, 2007 11:04 PM #19
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