Credit Crisis Cripples Markets

by benborden

“Every crisis carries two elements, danger and opportunity. No matter the difficulty of the circumstances, no matter how dangerous the situation…. At the heart of each crisis lies a tremendous opportunity. Great Blessings lie ahead for the one who knows the secret of finding the opportunity within each crisis.” Haiku Designs

There are currently dramatic and sweeping changes occurring within the mortgage industry. If you or any one you know needing a mortgage within the coming months, you need to read this!

Just last week there were two high profile lenders that shut their doors. One being the Wells Fargo subprime unit and more importantly American Home Mortgage and its wholesale counterpart, American Brokers Conduit. American Home Mortgage was no small potato. American Home Mortgage was the 10th largest lender in the U.S. and last year closed over $58 BILLION in loans. Its been reported, this shutdown left billions in UNFUNDED loans. Imagine a day, a week or an hour before closing and you get the call from a mortgage loan officer that the loan is not closing.

Approximately, 120 lenders have closed since late last year and this is no longer just a subprime issue. The bond market is experiencing unprecedented disruption. According to Federal Reserve Chairman, Ben Bernanke, “Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing.”

What does this mean to consumers?

Borrowers cannot wait any longer. As each day passes closing a loan becomes more difficult. This does not matter whether its a purchase or a refinance. Home values are declining, albeit more in certain areas but the credit situation is not area specific and actions must be taken now to secure financing.

Those with applications in with lenders should not delay. You need to stay in close contact with your loan officer and be proactive in getting all documentation back in a timely fashion. If you are in a special situation requiring any type of “lite documentation” for instance stated income, no ratio, or no documentation….Beware! Even a minor delay can mean not closing at all.

If you are a seller, you can not be reluctant to accept offers or reduced prices. Your qualified buyers have been reduced dramatically, along with a national home price decline and a surge in housing inventory. If your holding out for that “best price” understand that you in all probability will not sell your home.

If you are a buyer with credit issues, you need to align your self with a mortgage professional willing to take that extra step to rectify any problems on your credit file. Its my experience in the last several weeks, 590 credit with some credit depth and low collections and charge offs is doable. A 620 score is in my opinion THE magic number for lower mortgage insurance rates. The difference between a 600 and a 620 can be as much as 50% decrease in mortgage insurance costs.

If your an investor, lite doc borrower, may peace be with you, you are SOL. Many lenders have stopped offering Lite Doc and No-Doc loans, and even more lenders have pulled back on all forms of investor and stated loans. As market conditions change daily, a buyer’s pre-approval status can disappear overnight, delaying or killing the deal.

If your a less than perfect credit borrower in a ARM loan, 2/27, 3/28 or 5/25, I urge you to contact a reputable credit repair attorney or a knowledgeable loan officer to get out of that loan and into a Fannie Product. Even if you have a pre pay. If your a struggling ARM borrower now with your monthly mortgage payments you will be even more shocked to know that monthly payments can double in most cases once an ARM resets and you may not have a program to refinance into when your anniversary approaches. The costs can be much greater as days go on then a 2% pre-pay penalty with the ultimate costs being foreclosure.

What does this mean to you?
If you or any one you know has any ongoing real estate transaction or may have a “subprime loan”, I would be glad to help. Please call me right away. As a CMPS mortgage professional, I will utilize my experience, training and resources to help you and your loved ones get through these uncertain times. Now is not the time to be dealing with an amateur or one who is not qualified to give you expert guidance. I’m local can be held accountable, and you can trust that I’ll do everything in my power to help you achieve your dreams.

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