Things have been quiet around here at Iamnotfacingforeclosure.com for about a month. How many f*cked lenders can one write about? We have also been busy getting some things ready on some properties for the upcoming heavy rental season.
But lo and behold, our hero has returned. Thanks to a reader for pointing that out. We will take a few days to catch up on things and then begin commentary again.
Yet another lender has gone down in flames. Decision One Mortgage has ceased origination operations due to ‘market conditions and declining production volumes’. They will fund approved loans that complete by October 1st. There will be no funding after October 1st.
Anyone with a loan in process at Decision One that will not make that deadline will now have to scramble to find another lender. This is bad for customers and brokers alike. There have even been instances with other lenders going under where the loans have closed and on refinances, which require a 3 day right of recission period, the funding disappeared DURING the recission period. That’s right - the loan closed but then the funds were not available for disbursement. Talk about a mess.
Conforming lenders seem to be in pretty good shape but standards continue to tighten, even for the best credit borrowers. Stay tuned.
If the fed cuts rates this week, look for HELOC’s to adjust downward to follow the prime, which would most likely be 8%. All of those home-as-ATM folks will get a small bit of relief on those monthly payments.
In the real world, we are seeing numerous sales reps jumping ship from lender to lender, especially in the subprime market as companies continue to go under. Others are getting out of the wholesale market altogether and taking jobs in retail mortgages. The layoffs and closures have put many folks on the streets. A large number are changing industries altogether.
In addition, calls continue to come in from people worried that their ARMs are about to adjust (some for a 2nd or 3rd time). Unfortunately, not a lot can be done with some of these loans due to tightening standards, poor credit of the borrower, or high debt ratios. Some people are just plain stuck.
Last week in the Atlanta Journal, a family facing foreclosure was profiled and were SHOCKED when they arrived home from vacation to find a foreclosure notice and pending courthouse sale of their property in the mail. Now one wonders how someone could not know about something like this. They say they have been fighting with their loan servicer over charges and fees but you know what - you still have to make your payments. Oh yea, this family, fresh off a vacation, also stated that they had put in a pool and hot tub. The article did not say when they did it or how much they spent but when reading some of these articles on these folks who are in trouble, one just has to say ‘DOH’!
Yesterday, Christopher Dodd, senator from Connecticut, had the following to say regarding the mortgage crisis:
“We may have as many as 1 million to 3 million people who could lose their homes, not because they lost their jobs, not because the economy collapsed, but because they got bad deals on mortgages,” said Senator Christopher Dodd, a Connecticut Democrat who is chairman of the Senate Banking, Housing and Urban Affairs Committee.
Now I know there are unscrupulous and predatory lenders out there who have defrauded some people but typically, it’s been the greedy, cash out for goodies (SUV’s, credit cards full of platinum tv’s, etc), my house is an ATM crowd that are in trouble. We see people all the time with 2 SUV payments and brother, you better believe they paid those on time so they can present the proper image with their vehicle, but when the mortgage is due, let it go to 30 days late and torpedo your credit.
Saying people got bad deals on mortgages as a blanket statement is spin at its best. No one forced people to sign those refinance papers. In fact, refinances require a 3 day right of recission so borrowers can be SURE they want to go through with the loan.
Too many people are complaining about ‘I didn’t know it would adjust’ and so on and so forth. READ THE DOCUMENTS. Take responsibility - fiscally responsible taxpayers do not want to bail out the live for today crowd. Call and write your representatives and tell them you are against any bailouts.
I have not seen much if anything regarding our hero lately. However, things in Sacramento are not going well in the real estate industry so golden nuggets are probably not being mined from the email.
From the Sacramento Bee:
“Job growth has slowed down quite a bit in the first months of 2007,” said Howard Roth, chief economist at the California Department of Finance. “Construction, home sales — it’s all going down.”
Which is not news to Rachel Brandon of Sacramento. She shook an emphatic “no” when asked Tuesday if she is better off than she was in 2005.
“My career for the past 10 years was in the mortgage industry,” said Brandon, who is 39. “I have a license to do loans. Two years ago I was making lots of money — I was making deals in my pajamas from home. Now I’m waiting tables at Denny’s for $8 an hour.”
Still, she’s optimistic.
“I really like my job at Denny’s,” she said. “I’m learning quite a bit, and someday I’d like to have my own cafe. But, two years ago if you asked me if I’d be working for $8 an hour today, I’d have said ‘God, no way.’ “
Jamba Juice might be hiring too.
Several more casualties this week - Accredited Home Lending being one, joining others such as First Magnus last week. The main reason is the sources of money are drying up so these lenders do not have access to the money needed to fund loans. Some are funding loans that have closed and are in the recission period but are no longer taking any new applications.
One peripheral problem, which is more frustrating than troublesome, is that the lenders that are still in business are being slammed by new loan packages. Turn around times in underwriting are doubling, which in turn is frustrating borrowers as they wait for an answer on their loans.
The subprime lenders still in existence are raising rates to cover more of their risk and raising minimum credit scores and lowering maximum loan to value ratios. We are seeing the elimination of stated income loans for w-2 wage earners - makes sense as if they are w-2, they should show the documentation and verify the actual income. However, we may even see stated income loans go away altogether at some point.
Suntrust has announced that 100% CLTV 2nd mortgage loans are no longer available, no matter what the credit score. Previously, borrowers could do a fixed rate second mortgage to 100% at reasonable rates or piggy back a 20% second with an 80% first to get 100% financing and avoid private mortgage insurance.
This is a pretty big step as 100% seconds have been around for a long time for good credit borrowers. In addition, Suntrust announced huge layoffs.
While the trend the last few days has been down in the prime markets, other lenders are still raising rates. These are mostly the non-conforming lenders that still lend to prime credit borrowers - i.e. your loan is somewhere outside the Fannie Mae/Freddie Mac box.
My advice is if you are trying to do any kind of loan that is not conforming to Fannie/Freddie guidelines, DO IT NOW! Too many times borrowers mess around, wait, or whatever and in this current market, the loan you have today may not be available tomorrow, literally.
I saw a news clip last night where a state rep was discussing all the people facing foreclosure and increasing ARMs and ‘predatory lending’. Now I don’t know about you but I think of predatory lending more in the realm of 20% interest per month car title loans or payday advance loans. I do believe some of these are predatory but I also believe that the people who take these loans out normally have such bad credit that there is no other source of funds for them. The folks making these high interest loans are taking a huge risk giving such people cash. It’s debateable (and is being debated in many states) as to what a ‘fair’ interest rate is for such high risk lending.
But back to mortgages. Is it predatory to charge 9 or 10% to a borrower with a 550 credit score, multiple mortgage lates, and maybe even a bankruptcy in the past? Not that long ago, prime borrowers were paying 9%. Around 1987 when I bought my first house (owner occ, good credit), I paid 9.5%. Is it predatory to make a 2 year ARM loan to someone who is an adult, can read, can make decisions for themselves, and is clear on the terms of the loan? I don’t think so. The fact that these loans may adjust after the fixed period is a risk these borrowers (mostly) decided to take in order to get a lower initial interest rate. No one knows where rates will be two years down the road or what property values will be. Indeed, some areas that are not prior hot bubbles are still slowly increasing.
These politicians and talking heads throw words like ‘predatory’ around to news cameras in order to get into the spotlight and appear to the masses that they are ‘doing something’. In my experience, everything is laid out at the closing in the documents. Perhaps these documents are not the easiest to read or understand but the information is there and not hidden and with a little effort, easy to find. The attorney or notary is there and is being paid to explain anything that the borrower has questions about. Adults entering into contracts need to read what they are signing and not scream after the fact that they were lied to or taken advantage of by ‘predators’.
The public at large knows about some of the sub prime mess from the talking heads on the major network news programs. In general though, I am not sure how many realize what kind of tightening is going on at lenders.
I have heard from many people who want 100% financing with subprime type credit scores and don’t realize those days are gone for the most part. Some are even still asking about 100% investor loans with less than stellar credit.
Both prime and subprime lenders are eliminating entire programs and products that just 3-6 months ago were readily available. Should this be called ‘The Casey Effect’?
Many conforming lenders are talking about requiring 6 months liquid reserves. Back in the day when I got my first mortgage, the absolute limit on percentage of gross pay going towards your mortgage was 28% and overall debt to income ratio was 36%. You were allowed EIGHT PERCENT of your gross for car or credit card debt if you used your entire 28% for your home purchase. We may be going back there soon.
Well, now that the Casey saga is winding down, we will try to transition back to ‘Not Facing Foreclosure’. Admittedly, this blog has been mostly commentary, humor, and satire based pretty much exclusively on the trials and tribulations of our hero. It was fun, what can I say? Almost like a never-ending Saturday Night Live skit.
If there is any news on Snowflake, we will comment on it - fleeing the country, arrest, perp walk, Jamba Juice sighting, etc. Otherwise, we will try to write more about having success (sweet!) in real estate investing. Maybe people will want to read it, maybe not.
I’ll start with a brief commentary on a story that ran on The Today Show this morning on NBC. One talking head was giving solutions to those caught in the bubble. These included refinancing, reverse mortgages, and renting your property. The problem here is that most people who are in big trouble in their property cannot do any of these things.
Refinancing - if your house has lost value or you have bad credit due to being late with your new ARM adjusted payment, refinancing is often not an option at all. Either the equity is gone or your credit has gone down to the point where you can’t borrow enough to make it worth your trouble.
Reverse Mortgages - nice for people with paid off homes or low balances (in the right situation) but useless for those who are upside down or have no equity.
Renting the property - Typically in the areas where people are in the most trouble, many people have gone this route and the glut of properties for rent drives the rent prices down. Rents in many areas don’t come close to covering the monthly nut. However, if you are in dire straits, something may be better than nothing.
My only other comment on the story is about a lady that was interviewed. She has equity but no luck selling so far and doesn’t want to drop the price. I did not catch all of the story but the part I did see on her included quotes of ‘I was lied to’ and ‘I was misled’. Now I know there are unscrupulous lenders and brokers out there but here is what I have to say regarding this - READ WHAT YOU ARE SIGNING! Read the loan documents. If you don’t want to read them, at least find the places where the interest rate, term and prepayment penalties are disclosed. Personal responsibility is a bitch, I know, but it’s your name on the papers. If you are grown up enough to buy a house, you are grown up enough to read what you sign or ask questions.
