This entry was posted on Thursday, August 23rd, 2007 at 6:03 pm and is filed under Changing Guidelines. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
Today’s Mortgage Underwriting Changes
From BofA today….
All Expanded Criteria products will be suspended until further notice. Expanded criteria products include, but are not limited to, Stated Income/Stated Asset; Stated Income/Verified Asset; No Income/NoAsset; , No Ratio; and 80/20 (combos).
All Expanded Criteria pipeline applications must be locked by end of day Friday, August 24th.
Expanded Criteria is also known as Alt-A product. It’s where we go for folks that cannot fully document income to qualify, like nearly all self-employed people. Investors are no longer showing up to bid on any of this stuff in the secondary market. Banks have no choice but to stop making these loans until investors are willing to buy them again.
Bank of America is also making change to standard conforming product adjustments for all loans locked on or after 8/27/07.
This means rates will increase for lower credit score borrowers and smaller loan amounts on conventional financing.
August 23rd, 2007 at 6:17 pm
Looks like investors have lost confidence in the home owner’s ability to repay. It’s going to be quite the stretch of road ahead before they regain that confidence in my opinion. But I also believe this correcting market is necessary.
August 23rd, 2007 at 6:55 pm
Fear is the problem right now. Investors have been scared away from the auction table. But they’ll be back. All the dollars held by the Chinese and oil rich countries of the middle east have to find a home. As soon as the risk is repriced, all these programs will return.
August 24th, 2007 at 6:47 pm
This is similar to what I’m being told by lenders I work with here in the Raleigh real estate market. I did have one broker tell me today that he could do a no doc loan for borrowers with a credit score of over 720 and with at least 5% down. The rate premium was minimal… maybe 1/4 point.
August 25th, 2007 at 6:56 am
Bob, there appear to be a few lenders still willing to accept reduced doc loans. They seem to be the large banks who can portfolio these loans while they wait for investors to return to bidding table. However, investors are showing no signs of cozying up to Alt A again, and I expect the discontinuation of this type of product to continue for awhile.
Keep a watchful eye out if you have a deal hanging on that No Doc. I have had lenders decline previously approved loans or throw last-minute conditions at me that can’t be met in time to close. The lock then expires, and they won’t extend. Good luck