The last couple of weeks has been really crazy in the mortgage industry, but I did not want you to think that the mortgage lending world has come to an end. In my quest to keep you updated, I wanted to clarify what we are seeing in the industry.
Subprime Companies- These companies will continue to tighten their guidelines. No longer will we be see anyone who "fogs a mirror" get a loan. Most 100% financing has gone away in the subprime world in the past 30 days, unless the buyer has a 640 credit score or higher, going full documentation (i.e., paystubs, w2s, etc). It will become harder and harder to find stated subprime without 5-10% down.
Alt A- (These are the "boutique" type of loans, i.e., stated income/stated assets, no doc, etc). Because of the market turn and the foreclosures, we will see these types of programs become very high credit score driven. We are already seeing the No Doc loans at 100% disappear rapidly and the guidelines for stated assets become extremely strict.
FHA- We will see FHA become much more strong in our industry due to the subprime industry decline. This is not a bad thing because many of those buyers could have been FHA buyers anyway, but the loan officer did not understand how to work with FHA and it was easier to put them in subprime. What we will see is inexperienced loan officers trying to work FHA and really messing them up. Make certain that you trust a lender who knows FHA.
Freddie/Fannie- We have not seen yet a lot of changes in the A world other than the 2nd liens have become expensive and more strict on their guidelines. I feeling is that we will see a tightening in the DU and LP approvals (Fannie Mae and Freddie Macs auto-approval services) very quickly.
*Source: Linda Davidson of The Davidson Group at Service 1st Mortgage (972) 278-3400
www.davidsongroup.net
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