This is the first entry into my mortgage blog. You can't open a newspaper or log on to your computer any more without reading something about mortgages. Some people think that banks have no money to lend, so they might as well not go out and look for a house, because they aren't going to get a mortgage anyway. This is absolutely not true. We are writing, and closing, mortgages every day. It takes us a little more time, it will take you a little more time, but you will be able to do it. I will give you a background today, then cover different topics as time goes on. If you have a particular question about anything related to getting a mortgage, I will be happy to answer.
Over the past year and a half, the mortgage industry has been turned upside down. The first signs of what is now referred to as the meltdown began in the summer of 2007, when the sub-prime banks began to have trouble; too many people behind on their payments, and the number of foreclosures were starting to build. In order to have money to lend, banks need investors. The investors were beginning to hear what was happening, and grew wary of investing their money in what previously was touted as a secure investment with a great rate of return.
One by one, the sub-prime companies started to discontinue lending. Large banks with sub-prime divisions closed those divisions. Throughout 2008 banks discontinued products, beginning with what is known as Alt-A, those who fall somewhere between sub-prime and "A paper". The next product that saw cuts and declines in product offerings were the Home Equity Loans and Lines of Credit. Because these loans are considered to be in second position, they were the hardest hit by foreclosures. If the property is sold for less than is owed on it, the mortgage itself is in first position, and gets all or most of the proceeds. The home equity loan or line will only get what is left over.
Slowly but surely, the banks also discontinued their No Income Check, Stated Income, No Asset Check, and No Doc loans. Now this type of loan is almost impossible to get. If you are self-employed, you may qualify for a loan where you do not need to show tax returns, but you must show substantial assets and have at least 25% to put down.
Another thing that does not exist any more, other than as a VA loan, is 100% financing. There are no 80/20 with a 6% seller's concession for people who have no money at all to put down. Home Equity lenders still exist, but they limit what percent of your home's value you can borrow.
The bottom line is, there is still plenty of mortgage money out there, you just need to show the banks that it is likely that you will pay them back. Stay tuned for the next installment, where you will find out what CIA is all about.
Robin Silverberg
Senior Loan Officer
Preferred Empire Mortgage
rsilverberg@pemc.com
