Posted on 08/08/2007 6:47:57 AM PDT by Hydroshock
NEW YORK - The dream of owning a home is fading away for many Americans with less than stellar credit.
On Tuesday HomeBanc Corp. said it will not issue any more loans, and Impac Mortgage Holdings Inc. shut down a type of loan called “alt-A” for people with limited documentation or slight credit issues.
That followed bankruptcies for two of the country’s biggest home lenders — American Home Mortgage Investment Corp. and New Century Financial Corp. — and tighter terms at most other lenders that are thus far surviving a shakeout in the industry.
“Every day I hear about a number of lenders that are reducing their products,” said George Hanzimanolis, president of the National Association of Mortgage Brokers. “It is going to take a while before the dust settles.”
(Excerpt) Read more at msnbc.msn.com ...
ping
When you buy a home with a mortgage you can't afford...you really don't own the home. You are just renting it from the bank until you declare bankruptcy.
No down, no doc loans were rare even at the height of the easy money mortgage period, and required credit scores over 680. They were NOT being given to people that didn’t pay their bills.
There are two different forces at work here.
One are subprime loans. Some were “stated income” but they still had to have verifiable employment, even if not proving income. These were for borrowers with average to poor credit, and understandably became an issue, mainly for ARM loans that adjusted 3 points upwards after 24 or 36 months. Mainly they are a problem because the people could only barely afford the payment prior to adjustment.
Next are “no doc” Alt-A loans. A different animal. Here, credit has to be good, but there is generally NO proof even of employment, let alone income. Defaults on these have still not been as high as for the first type I explained.
It would not supprise me that by next year you will not be able to get a mortgage unless you have a credit score of 720+ and put at least 10% down.
If Bush wasn’t so busy steering hurricanes, he could be holding ‘common sense lending practices’ seminars for these mortgage lenders. He makes me so mad.
Bingo.
THEN, the blame isn't with those people in their mirror. The blame is with the nasty banks who repossess. The leftists then scream about the nasty big businesses.
People with "less than stellar credit" shouldn't be buying a house. They should be changing their behavior so their credit is good. That is, saving money for a decent down payment is a way to go.
Is this now considered rocket science?
I hear opportunity bangin’ my door down...
There always will be subprime in some form or another, and not everyone with "less than stellar credit" is a deadbeat or even is someone without a down payment. There are 101 reasons someone might need a subprime loan. However, I'd generally recommend 5% - 10% down to almost anyone, unless they have a lot of money they'd just prefer NOT to spend and would rather keep it in reserve. Everyone's situation is different. Mortgage lending is not one-size fits all, and I think that was part of the problem - people with 560 credit scores generally aren't responsible enough to purchase a home...but it does, admittedly, depend on why their score is that low. It could be because of 12 small medical collections, or it could be because of never paying a single bill on time, ever. The first case, probably OK to buy, second case, not so much. Which goes to show credit scores alone aren't a satisfactory indicator of creditworthiness despite what Fair Isaac says.
LOL!
The government is going to step in and allow the Federal Housing Administration (FHA) to insure these outstanding mortgages up to a certain maximum balance...say $500K.
The mortgagee will refinance at a government set interest rate and presto....crisis averted.
It's not rocket science.
There's no way this won't happen...especially if the RATS control the Congress and the White House.
President Bush should initiate this right now.
Cheers!
Great! We’d love to have you there. Keep me posted and bring anyone who might also be interested.
Sure, but just try to sell that message to an electorate full of people with "less than stellar credit". ;)
The Hillary message that "everyone deserves to own a home and if they can't swing it financially it's all the fault of Big Business" is going to resonate big time in the 2008 election. It's what people want to hear.
I’m no fan of government intervention, but I’d rather see it done through FHA amending their guidelines than through what Hillary proposed with her billion-dollar giveaway. With FHA, a person is still expected to make their payment or they’ll still lose the house, Hillary is proposing just giving them money to keep it, big difference. With amended FHA guidelines you’re still giving the homeowner a chance to redeem their ability to pay their bills on time without a giveaway.
One more thing: Don't expect your mortgage company to inform you when your loan-to-value ratio falls below 80%. When that happens, most loans allow you to drop your credit life insurance that is often tacked onto your loan. The bank gets a cut of this premium and it is some of the most expensive insurance on the planet. When I was buying some investment property, the lender told me I had to have mortgage insurance because I was putting less than 20% down. I said: "Fine. I'll find my own insurance company and make you the beneficiary." In a surprise move, they more or less said forget it...probably because they weren't going to get their slice of the premium.
No down etc isn’t the problem. People being given mortgages for more than they can afford are the problem. We had a mortgage but didn’t buy a house. We were priced out. HOWEVER, the mortgage company gave us a mortgage for more than we were comfortable spending. $100,000 more. AND they encouraged us to use it. How many people believe a lender that tells them they can afford “more”? The people that are now defaulting.
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