What Do We Do Now?
Last month’s article wasn’t meant to frighten anyone. It was simply my way of letting you know what the heck is going on in the mortgage industry and what got the market in the situation we’re in these days.
Let me set the tone for this article by mentioning a few things from last month’s: “The market is correcting itself.” “It’s just in a slump.” “Guidelines are changing.” “The industry will always find ways to make home-buying affordable.”
Many of you probably ask how can there be options. I personally think things will get back to normal sooner than most think because my idea of normal goes back much farther than anyone who has been in the housing market within the past 5 years as a homeowner, realtor, investor or mortgage loan officer. When I got into this business in 1982, 30 year fixed rate mortgage interest rates commonly were in the double digits (something we won’t see). You had to put 10–20 percent down, and pulling equity out of your home was taboo
what we see today is a result of the industry being too creative and too greedy. In order for things to get back to some sense of normalcy, the industry will return to a conservative and responsible position. Since last month’s article, we’ve seen several more mortgage companies go out of business, many of which you don’t read or hear about because their roles in the business were to pass loans through the system directly to the bigger companies. These companies had very little history in the industry; therefore they won’t be missed because they only made it easier for the bigger banks and lenders to put closed loans on the books a lot faster. I think banks and lenders will go back to doing more business with companies like 1st Commitment Mortgage Services because we keep a pulse on what’s going on in our communities.
THESE WILL BE YOUR OPTIONS
more broker business from fewer brokers
Many of you probably ask how can there be options. I personally think things will get back to normal sooner than most think because my idea of normal goes back much farther than anyone who has been in the housing market within the past 5 years as a homeowner, realtor, investor or mortgage loan officer. When I got into this business in 1982, 30 year fixed rate mortgage interest rates commonly were in the double digits (something we won’t see). You had to put 10–20 percent down, and pulling equity out of your home was taboo
what we see today is a result of the industry being too creative and too greedy. In order for things to get back to some sense of normalcy, the industry will return to a conservative and responsible position. Since last month’s article, we’ve seen several more mortgage companies go out of business, many of which you don’t read or hear about because their roles in the business were to pass loans through the system directly to the bigger companies. These companies had very little history in the industry; therefore they won’t be missed because they only made it easier for the bigger banks and lenders to put closed loans on the books a lot faster. I think banks and lenders will go back to doing more business with companies like 1st Commitment Mortgage Services because we keep a pulse on what’s going on in our communities.
THESE WILL BE YOUR OPTIONS
more broker business from fewer brokers
Basically, this means mortgage brokers will be relied on to originate more business for realtors, lenders, and banks because the experienced mortgage broker knows its markets. We are an extension of lenders’ sales staff and our overhead is much less than those Pass-Through-Lenders.
More basic loan programs (i.e. fixed rate)
The subprime business first hit the market in the mid-1990s and it was downhill ever since। We will fix this problem by going back to the basics—fixed-rate programs because they are the safest program. Interest Only, Option ARM loans and other Exotic loan programs were never meant for first-time homebuyers and many homeowners with these programs are wishing they had a standard fixed-rate loan.
Improved credit and credit score requirement
Credit will become the most important factor in extending credit like it used to be People will have to show their creditworthiness by having a history of good credit. An option to improve one’s credit will be the use of credit score improvement programs such as the “Rapid Rescore.” This system will improve scores immediately after satisfying derogatory credit. There’s normally a cost of a couple hundred dollars for this service.
FHA and VA will recapture more of the market share
FHA and VA will definitely re-capture most of its market share during these times because they have withstood almost every storm. FHA released an initiative last week that will refinance subprime ARM mortgages. The homeowner’s mortgage history must show on time mortgages payments before their mortgage rates went up. Contact your Century 21 Atlanta, GA to speak to an FHA certified loan officer.
More down payment required on Conventional Loans
I remember when everyone had to put money down when buying their home This requirement will return because history shows that homes purchased with down payment have a lower default and foreclosure rate The belief is when an investment is made by the homeowner they tend to respect their investment.
More documentation
The No Doc, Stated Income, Stated Asset and Bank Statement type loans are gone or severely modified many of these programs created a wave of misuse and abuse in the mortgage industry because people found ways of pushing the envelope. These programs were created for self-employed persons who made the income but wrote a lot off of their taxes. Therefore, we will go back to having almost everyone document their income and assets when buying or refinancing their home.
More use of Automated Underwriting Systems for approval
Automation to the rescue. Many of my clients have been rewarded with the use of our automated underwriting system that will basically look at their complete profile and determine their creditworthiness.
Percy Blackshear, III President 1st Commitment Mortgage Services, Inc.
More basic loan programs (i.e. fixed rate)
The subprime business first hit the market in the mid-1990s and it was downhill ever since। We will fix this problem by going back to the basics—fixed-rate programs because they are the safest program. Interest Only, Option ARM loans and other Exotic loan programs were never meant for first-time homebuyers and many homeowners with these programs are wishing they had a standard fixed-rate loan.
Improved credit and credit score requirement
Credit will become the most important factor in extending credit like it used to be People will have to show their creditworthiness by having a history of good credit. An option to improve one’s credit will be the use of credit score improvement programs such as the “Rapid Rescore.” This system will improve scores immediately after satisfying derogatory credit. There’s normally a cost of a couple hundred dollars for this service.
FHA and VA will recapture more of the market share
FHA and VA will definitely re-capture most of its market share during these times because they have withstood almost every storm. FHA released an initiative last week that will refinance subprime ARM mortgages. The homeowner’s mortgage history must show on time mortgages payments before their mortgage rates went up. Contact your Century 21 Atlanta, GA to speak to an FHA certified loan officer.
More down payment required on Conventional Loans
I remember when everyone had to put money down when buying their home This requirement will return because history shows that homes purchased with down payment have a lower default and foreclosure rate The belief is when an investment is made by the homeowner they tend to respect their investment.
More documentation
The No Doc, Stated Income, Stated Asset and Bank Statement type loans are gone or severely modified many of these programs created a wave of misuse and abuse in the mortgage industry because people found ways of pushing the envelope. These programs were created for self-employed persons who made the income but wrote a lot off of their taxes. Therefore, we will go back to having almost everyone document their income and assets when buying or refinancing their home.
More use of Automated Underwriting Systems for approval
Automation to the rescue. Many of my clients have been rewarded with the use of our automated underwriting system that will basically look at their complete profile and determine their creditworthiness.
Percy Blackshear, III President 1st Commitment Mortgage Services, Inc.
1st Commitment Mortgage Services, Inc. is a Georgia Residential Mortgage Licensee, License Number 19155.
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