Real Estate Info & FAQ

Sub Prime mortgage fallout

If you pay any attention to the news, I am certain that you have heard numerous reports of Sub-Prime lenders going under. This is rocking the financial markets. There are many reasons for this, including the glut of money that was dumped into the markets over the last 5 or so years. Another culprit is the innovative loan products that were sold to people that had no business getting them. Couple this with VERY loose underwriting standards and...VIOLA! You have companies dropping like flies now that their portfolios of loans are defaulting and they are cash strapped.

But what does this have to do with you? Even though you may have good credit, solid job and easy to prove income, this does effect you. It effects you in rates. Obviously, as this shakes out in the markets, mortgage rates are bouncing around like a yo-yo as Mortgage Backed Securities investors try to figure out how to price their deals.

One other effect of this is in underwriting times. I have a loan in underwriting right now that is taking 2 to 3 times as long as it did 6 to 12 months ago. I am certain that this is due to the fact that, due to the lack of work, underwriters are getting layed off. So, a loan that would breeze through in the past in about 2 to 3 days, now takes over a week to get done and that time is getting even worse.

Another way this effects you is in underwriting standards. I ran a loan today that, 6 to 9 months ago would have flown through the underwriting engine. But not today. It took some real time and the final deal that I could put together for the client was not as attractive. This is all due to the pressure put on the markets to tighten up the belt. So, it effects you in what you may qualify for, since the pot is smaller and pressure is on the banks to deliver better QUALITY loans, as opposed to QUANTITY. So, if you have credit that is good, but not great, or if you have some other extenuating circumstances, get involved early. Do not let someone tell you that "we can get that done in 10 days", because that is unlikely. Stay on top of it and understand that, if you are working with a professional mortgage planner, you are in good hands. They will figure something out for you.

The one thing you can count on in the mortgage business is CHANGE!

Labels: Buyers, Financing, General Real Estate News, Subprime

posted by jkballentine @ 10:49 PM