Mortgage Loan Programs: The Full Monty

There is a great deal of misunderstanding surrounding the abundance of different loan programs available.

This seminar is not meant to be an all encompassing education in residential lending, but rather to familiarize you with residential lending programs. Our hope is to equip you with enough information to prevent you from getting into a loan program that may not work for your situation.

We’ll Pay Your Mortgage!

Buy a beautiful Gemcraft Home and we will pay your mortgage for up to ten months! Wow!

It’s true. I received the announcement this morning. We are offering amazing incentives for buyers in what is already a buyers market! Stop by my “Official” website by clicking here and click the “Free Consultation” button to find out more. Certain conditions do apply….as always.

It’s a great time to buy! And Chad Dukes at Chesapeake Mortgage is making it even easier.

Call me today at 410-652-3339!

Bank of America is Out of the Wholesale Market

Bank of America is exiting the residential wholesale mortgage market according to this AP Report found on Yahoo Business News.

Bank of America is the country’s second largest bank. They had been rumored to be in the market to buy Countrywide over the last few months. In fact Countrywide had received a $2 billion injection of funds a few months back from BofA. Bank of America has had minimum exposure to the subprime crash of the last year as they exited subprime lending is 2001. Nonetheless, BofA has shut down the wholesale arm of its business to concentrate on retail lending.

Congress to Outlaw Stated Income Loans

The 110th Congress has put forward a bill entitled “H.R. 3081: To amend the Truth in Lending Act to protect consumers.” The intention of the bill is to protect Consumers from getting into loans that they can’t pay. Of specific concern is the desire of certain members of congress to deny consumers access to stated income loans. A stated income loan is one where the consumer simply states what their income is with providing any documentation to prove it. At this point you may be thinking, “Are stated income loans a good thing?” Like so many other products in the mortgage world this product isn’t a good thing or a bad thing its simply a tool. A good tool can save the day….or wreck the day if it is abused. The same is true with mortgage products.

Stated income loans were created specifically for people who had a good income but had difficulty proving that income; people like business owners, contractors, people who work on commission or for tips, etc. Without these products a great many people wouldn’t be able to buy homes, despite their income or credit history. Should business owners and sales people be unable to buy homes? Or should they be denied access to refinancing options once they are in their homes? If they have shown a record of responsible borrowing why would we deny them access to a mortgage? This is what the congress wants to do.

The following excerpts show a clear intention to deny access to Stated Income Loans;

`(C) VERIFICATION OF CONSUMER INCOME AND FINANCIAL RESOURCES- In the case of any consumer credit transaction secured by a consumer’s principal dwelling, the income and financial resources of the consumer shall be verified for purposes of this paragraph by tax returns, payroll receipts, bank records, or other similarly reliable documents.

And…

`(E) CONSUMER STATEMENT IS INSUFFICIENT PROOF- A statement by a consumer of the consumer’s income or financial resources shall not be sufficient to establish the existence of any income or financial resources when verifying the reasonable ability of the consumer to repay any consumer credit transaction secured by the consumer’s principal dwelling, for purposes of this paragraph.

Again, the intention is to protect consumers from getting into loans that they can’t pay off. Its a noble intention. What it fails to realize, however, is that the lending industry also has a very keen interest in avoiding mortgage defaults. Lenders have no desire to give people money who are incapable of repaying. Those lenders who do so are punished by the market. And we can see this taking place now as many lenders who were overly aggressive are no longer in the business. The market has a way of taking care of itself.

In recent years the mortgage industry was experiencing such a boom that lending guidelines were too loose. Rates were so low that sellers were able to charge more to sell their homes since financing charges were so cheap. The result was that housing prices rose at record rates while consumers with any credit profile would get financing. The pendulum had swung wide…..too wide. Now that pendulum is swinging back. Prices are dropping and financing options are disappearing. This is a natural fluctuation of the market. And it is the lenders and the secondary markets that are demanding more documentation and higher credit standards from borrowers.

It is no doubt that the Mortgage industry, and in fact all credit industries right now, are in a state of flux. The situation appears nasty but it is a natural market cycle. If you really want to see things get ugly let the government intervene! It is in that spirit that I ask that you forward this post to all mortgage industry professionals that you know. Call or write your elected representatives. Tell them to keep their hands off of stated income loans and to let the market decide what are or are not viable loan products.

Greenpoint Mortgage Out of Busniess?

Details are shady. But a customer of mine just reported that the lender is no longer funding loans. I will post more when I know more.

UPDATE!

It’s official according to Bloomberg.com report

“They said, ‘Let’s just cut our losses now and get out,’ ” said Thomas Brown, chief executive officer at Second Curve Capital LLC in New York, which owned 1 million shares of Capital One on June 30. `Certainly the company had been getting a lot of questions about that business.’

GreenPoint focused on “Alt-A” lending, an alternative for people with good credit records who don’t meet the standards for prime mortgages. Investors who buy those home loans stopped bidding this year as concern about rising defaults grew, pushing Alt-A lenders including American Home Mortgage Investment Corp. and HomeBanc Corp. into bankruptcy this month.

‘The market disruption is too great to continue with GreenPoint’s originate-and-sell business model,’ Capital One Chief Executive Officer Richard Fairbank told workers in a memo. He said he had hoped GreenPoint would be “a growth platform.”

I think its a shame that Greenpoint’s keepers have decided to close shop. They were a good business. It’s a shame that Capital One didn’t think so.