Guest Post: I decided with all of the confusion and discussion about the mortgage market that it would be helpful to have a mortgage broker provide you with his perspective on that market:
I know, I know. You wouldn’t believe it by watching the news that there are any more lenders in America. Everybody is going out of business. It’s all gloom and doom! The sky is falling! The sky is falling! (to quote Chicken Little) Well, guess what? It just ain’t so!
Keep in mind; bad news sells. The news media would never write a story about a boy scout helping a little old lady across the street, but have him hit her over the head and steal her purse and they’ll be interviewing his kindergarten teacher, his neighbors, check with the state to see if he’s ever received mental health treatment and bring in an endless parade of psychologists, legal experts, expert witnesses, law enforcement officials and Nancy Grace to provide unending coverage until your eyes glaze over and brain activity ceases.
First off, remember that sub-prime loans weren’t all about having bad credit. It was no-documentation loans, stated income loans and jumbo loans (over $417,000). If you can provide full documentation (can prove income), put at least 5% down and are under a $417,000 loan amount; NOTHING HAS CHANGED. Even if you have to do a stated income or no-documentation loan; they still exist. They just may require a higher credit score.
Secondly, and I had this conversation with my partner, Dave, last week. We aren’t turning down many more loans than we would have six months or a year ago. Sure, there are those who are “on the bubble” around the 580-620 credit score that are more difficult to do now, but we have a tool we use in conjunction with our credit bureau that allows us to show a customer how to raise their score by 30-50 points within 30 days. The couple or individual needs to have a little cash to pay down some debt, but in many cases that tool allows us to act as if the “credit crunch” never happened.
Now, we did lose approximately 100 lenders nationally, (ouch!) but the big secret is that there are still several hundred national and regional lenders out there. Guess what? You only need one! They are still selling their products to Fannie Mae and the good news is that the rates are still low.
Here’s some more good news. Fannie Mae (a government sponsored agency that establishes standards and buys 1st mortgages on the secondary market) and FHA (Fair Housing Administration that establishes guidelines and insures loans for people with limited credit) are being pressured by consumer groups (and Congress) to pick up some of the slack in the non-conforming market. FHA is especially sensitive to the non-conforming market fallout and has even begun a program called FHASecure Initiative. This program allows homeowners with adjustable-rate mortgages (ARMs) to refinance with FHA after the loan has become adjustable. If there is sufficient equity in the home, FHA will allow the homeowner to refinance WITH LATE MORTGAGE PAYMENTS. FHA is also raising maximum loan amounts allowed and dropping the minimum score requirement. (It used to be 580) All good news for those clients, “on the bubble”.