What's Going on in the Mortgage Business?
First, we would like to take this opportunity to wish all of our friends and family a wonderful holiday season. We appreciate you and are grateful for your business.
So what's going on in the mortgage business? We are hearing so much about the "mortgage meltdown," the "subprime crisis," the "liquidity crunch," lenders closing their doors and President Bush freezing subprime mortgage rates.
While the news is scary, it is important you understand that there are good programs and rates available. For example, if you still have good equity in your home and good credit, you can get a 5 year fixed rate jumbo loan (maybe to replace your loan that is resetting soon) between 5.5% and 6% - with or without income and asset verification for qualified borrowers.
There are also two very important programs that we want to share with you:
- Equity Key - The Reverse Mortgage Alternative. This is an innovative new way for seniors to access the equity in their home, second home, rental property or commercial property without settling for restrictive and expensive reverse mortgages. This is a new program and we think you will find it very interesting. For a brief overview, click on the Equity Key link above or call us today.
- Commercial Loans or Lines of Credit - If you own or are looking to buy small commercial real estate, there is a relatively new and potentially free way to access your equity in these properties. For more information, click on the link above or contact us today.
So what does all the negative news mean to you? Following is a simplified highlight of these issues.
Mortgage Meltdown/Subprime Crisis/Liquidity Crunch
What happens is that lenders sell their loans in pools on Wall Street and these pools of good loans are/were sprinkled with subprime loans that have gone bad. The reason these pools of good loans included subprime loans was to increase the yield/return on the pools. This technique worked well for a number of years while home prices were on the rise and subprime borrowers could refinance before their subprime loans reset. Now that home values have stopped rising and are declining in many markets, these subprime borrowers cannot refinance and many of them cannot afford their new/reset payments. As a result, many are ending up in foreclosure and these pools are no longer attractive to investors on Wall Street. This is where the "Liquidity Crunch" comes in... less investors to buy pools of loans means less money available for lending which means higher rates and less availability of money.
It is important to understand that this "Mortgage Meltdown" has mainly affected the jumbo loan market - loans over $417,000. However, the conforming loan market - under $417,000 - is becoming compromised as well. Additionally, second mortgages and home equity lines of credit have become much more restrictive and harder to obtain for many borrowers.
While lenders who sell their loans on Wall Street are having a tough time offering competitive rates, the good news is there are portfolio lenders (lenders who don't sell their loans on Wall Street) that have terrific rates.
Lenders Closing Their Doors
As of this morning, Friday the 14th of December, according to the Mortgage-Implode-O-Meter website, 204 major lenders have imploded in the last year. This is unprecedented in the mortgage industry, however, there are still many good lenders out there. The "imploded" status is somewhat subjective and does not necessarily mean operations are ceased permanently: it can mean bankruptcy filing, temporary but open-ended halting of major operations, or a "firesale" acquisition. The Companies include all types (prime, subprime, or a mix of both; retail or wholesale; subsidiaries and entire companies). Additionally, the website shows lenders that are on the "watch list" and we use this resource to ensure that we are working with the right lenders and advising our clients appropriately.
President Bush Announces Industry Agreement
to Freeze Sub-Prime Mortgage Rates
Following weeks of talks with Treasury Department officials, mortgage lenders and Wall Street firms, President Bush announced an agreement to freeze interest rates for up to five years for some borrowers with sub-prime loans.
What you need to know about the agreement:
- The agreement will allow distressed borrowers who are current on their sub-prime loan payments to keep their low introductory rates
- The rate freeze will apply to loans taken out between January 1, 2005, and July 30, 2007, and scheduled to rise in 2008 and 2009
- The rate freeze will exclude the following groups:
- Borrowers who are delinquent on payments
- Borrowers whose introductory rates expire before January 1, 2008
- Borrowers who mortgage companies determine have sufficient income to pay the higher rates
According to recent news reports, administration officials said the rate freeze was only part of a broader plan. For more information, refer to this White House fact sheet,
With these things in mind, it is more important now, more than ever, to work with an experienced professional you can trust and who is prepared to guide you through this ever-changing mortgage market.
Sincerely,
Your CWC Financial Loan Team
888-711-5454 Toll Free / info@cwcfin.com / 415-454-1130 Local |
