We're not in a declining market…we're just soft

I just received this memo from Washington Mutual:

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Please be aware that most of King, Snohomish, and Pierce counties are now considered to be in a “soft market.” This means that your LTV max will be reduced by 5% from the normal established maximum if your loan is in a soft market on a conforming loan (ie, our Flex 100 will now be countered to 95% LTV if your loan is in a soft market).

WaMu has provided a calculator to determine if your zip code is “soft”…yes, Billiruben, even my West Seattle zip is soft…so is Bellevue and every other zip code I’ve popped in their system.

About a week or so ago, Chase issued a memo (for second mortgages/home equity loans) that Pierce, Thurston and Clark Counties have a -5% factor and Asotin has a factor of -10%.

PMI Mortgage Insurance Company will no longer insure loans over 97% loan-to-value and are limiting the loan to value to 90% in “distressed markets”.

The photo is of my 12 year old cat, Louise. She’s soft.

About Rhonda Porter

Rhonda Porter is an NMLS Licensed Mortgage Originator MLO121324 for homes located in Washington state. Her blog, The Mortgage Porter, is nationally recognized for sharing relevant information to consumers about mortgages.

She has been originating mortgages since 2000 at Mortgage Master Service Corporation #40445 Consumer NMLS Website: http://www.nmlsconsumeraccess.org/TuringTestPage.aspx?ReturnUrl=/EntityDetails.aspx/COMPANY/40445
NMLS ID 40445. Equal Housing Opportunity.

You can follow Rhonda on @mortgageporter, Facebook and/or Google+

Comments

  1. I should add that these are just two of the lenders we work with out of many. I thought this was worth “reporting”.

  2. Thanks, Rhonda! Q: When will the new conforming loan limits come out?

  3. Rhonda, thanks for the quick reporting!

    I am currently stuck on WAMU’s web site trying to get a AUS/credit reaccess. The site is swamped.

    I bet other lenderfollow suit in rapid succession declaring soft market.

    RE new conforming limits, MMG predicts that Seattle, Bellevue, Everett, Tacoma, MSA will be at $493K. We probably won’t have official notice for another 4 weeks.

    The incomplete news out there is keeping some folks from pulling the trigger that should.

    Whoo-hoo! Another wild day in brokerworld!

  4. Rhonda, in years past, we often did a buyer 10% down, a lender 10% first and a seller 10% second. The underwriting criteria for the 10% seller second was market rate interest, with no balloon payment for at least 5 years. I assume this is still viable, and might be helpful for buyers with low downs to consider?

  5. Jillayne, Roger’s correct with Mortgage Market Guides best guess on the loan limits. However, Fannie/Freddie still need to figure out u/w guidelines and price hits for loans $417,001 and over…I’m guessing it will be March too but there is a lot of pressure to push this through.

    I still have some lenders offering 100% Fannie Flex with LPMI…however when I asked after receiving WaMu’s memo, the response is “we currently have it”.

    I would recommend that any borrower who’s counting on 100% financing should make sure they’re locked and if they’re still shopping for a home, they may want to contact their Mortgage Professional to get a “plan B” for financing in place.

  6. Leanne, I think you mean a lender 80% first with a seller 10% second and buyer 10% down? That would probably still fly. Finding lenders who will do the second mortgage at 10% is getting tougher. They’re still out there (at this moment).

    If your lender is using someone like WaMu or another lender that views our market soft, then they may not view the ratios as 80/10/10. The first mortgage loan may be treated as an 85% (pmi may be required). A 75% ltv would be treated as an 80%.

  7. The problem that I am having is borrower’s w/ $650K+ balances thinking the $729K max was gonna save their bacon. It will not happen here.

    Just to underscore the confidence I have in this site (RCG), it is the first place I come to for news affecting the local lending market (to both discover and to share).

    We cannot always be right, but the relevance is high, it is very timely and the info is pretty darn accurate.

    Nice work.

    BTW, if anyone has stats on the percentage change in investor involvement in the local market, please share. I think there may be a correlation between that number and home price trend prediction. Just a hunch, and not my specialty, just curious.

  8. Thanks, Roger. I left a comment on one of Jillayne’s post with the Chase info…that was the first time I had seen a local area deemed “depreciating” by a lender. WaMU’s message this afternoon did surprise me along with PMI’s (note: not all pmi companies have the same guidelines yet–this is just from the company: PMI).

    I’m wondering with WaMU if this is a way for them to earn extra funds, look prettier to potential buyers by being the first lender to throw King County into the “soft” bus.

    Their site is busy because as WaMU’s memo says “it’s not too late…you can still submit tonight” since the “soft markets” guidelines go into effect tomorrow.
    And…it looks like they were making adjustments to their system with new guidelines (another memo I just received).

  9. That’s why I was there. Gave up. Got a couple submitted in time. They said cutoff was 5PM today.

    If Good Ol’ KC is a soft market, what county isn’t?

    I doubt that WAMU really thinks it thru that much, just looking to limit liabilities and risks in their portfolio.

    We’ll be hearing from other major lenders soon, I am sure of it. Should keep this post busy, if everyone reports as they come in!

  10. Thanks for the info Rhonda. Do you now what WaMu’s range of market rating levels are? Are there “plush markets” with 10% reductions and so on?

  11. tj, I’m not sure what you mean by “plush markets”. Most zip codes in Washington are being called a “Risk Level B” which is a 5% deduction of allowed loan-to-value limits.

  12. can this affect loans already locked and in Escrow? Currently have a 95% LTV closing next week, can the lender change terms on me?

  13. cur1, it all depends on who your lender is, what your program is…etc.

    If it’s WaMU and your loan has been locked and submitted by 5pm tonight, they’re going off of the “old” guidelines.

  14. Leanne Finlay says:

    HI Rhonda, yes that was a typo, I meant seller 80%. Still, and all, it looks like quality buyers can buy pretty easily, and get a far better of selection of homes to choose from than in recent years.

  15. You have a beautiful cat, BTW.

  16. Thanks, Jillayne. She was my first pet. In addition to Louise, I also have Thelma, a white cat we inherited when I bought my last house.

  17. Leanne,

    Quality buyers are going to have a difficult time finding 100% Fannie Flex programs.

    Quality buyers are going to need a credit score of 660 or better (hopefully it’s 680 or better).

    Anyone considering buying a home should meet with a Mortgage Professional as soon as possible to make sure their credit is where it needs to be. I worked with someone today who thought they were doing all the right things with their credit this past year and their scores still need work. You can do what you think are all the “right things” and not get the “right results” with credit scoring.

    FHA, especially with the higher loan amounts, will become very popular.

  18. Hi Rhonda, sorry plush was just a joke as something softer than soft. What I really wanted to know is if “soft” is the lowest rating WaMu gives a market or if there are lower levels that gives worse LTVs? What are for example the rating of places like Riverside, CA?

  19. Funny, tj! I was trying to find a picture of something really soft and fully on istockphoto when I realized I have a picture of my cat!

    WaMU has more lower levels of plushness. We are rated a B on WaMU’s soft scale. They have risk ratings from A (no risk) to D.

    B-D all have the same 5% hit for conforming loans. And varying hits for non-conforming.

    Riverside is a D…according to WaMU.

    One thing to note: when changes like this happen, they do quickly. We received our memo at 3:45 today with a warning to submit all WaMU loans by 5:00 tonight. As Roger Ingalls mentioned, the site was jammed. I haven’t used WaMU in years…but my point is, when a lender makes a massive change or cut back, we (LO’s) have little time to react.

  20. Leanne, Seller 80%? I think it’s a typo again. ;) finding a bank to go in second position with 10% following a seller financed first at 80 may be challenging or pricey. No one wants to be in second lien position…many of our second lien lenders have either cut back the ltv dramatically or pumped up the rate. Second mortgages are also very credit score sensitive.

  21. Thanks Rhonda. your cat is beautiful and still a youngster. My parents cat back in Sweden is 22 and still going strong. She was born by the cat I got when I was seven who in turn lived until she was 23.

  22. I assume all lenders are doing this due to recent Fannie and Freddie guidelines.

    You can enter your zip here:

    http://decliningmarkets.gmacrescap.com/

  23. I wonder what WAMU’s criteria is to determine someplace is soft? Specifically are they looking at prices, or volume, both? If it’s volume I can see why they’d say most of King County is soft.

  24. I just found a pdf on my lenders policy and it looks like when they designate a market, the changes apply as of that day going forward. I am suprised Wamu already listed Seattle…. they may be jumping the gun compared to other lenders.

    I have heard from some who work at Wamu that things discussed at the annual meeting where keeping there loan portfolio in check and a desire to not increase it for 2008. I think they have that much already at risk that they dont want to contnue to bring loans on the books. This could be a tactic to execute that strategy.

  25. I don’t think lenders like WAMU want to stop lending (it kills the cash flow), but I do think many are VERY eager to get higher quality, lower risk loans added to their books, to balance out the lower quality loans they already hold.

    Lowering the LTV risk by 5% is a big step in that direction.

    I already have caught wind of another major lender ready to announce the King Co soft market, but will wait for their official announcement to name them.

  26. Anon-when I enter my Seattle zip code with the link you provided, it shows “low risk”…not “risk level b” like WaMU has determined. (Thanks for the link).

  27. housing-obsessed kitty lover says:

    Rhonda your cat is gorgeous :)

  28. That is a gorgous cat. I also am tickled that Rhonda has cats named Thelma and Louise. Nice!

    This question is sort of a tangent, if you don’t mind. Rhonda, it seems like you keep citing 680 (or thereabouts) as an important threshhold for lending, as you did up in comment #17. I know that credit scores are complex creatures, but I wonder if you can point me to a source that breaks out what kind of scenarios lead to a credit score of 680, and maybe what the distribution of credit scores are across the population. I ask because my husband and I have stellar scores in comparison (both at about 800), and I don’t feel like we do anything particularly special: pay our bills on time, keep our CC balances low, live within our means. Is that really so uncommon?

  29. Angie, I’ll do a post on that. I would bet that a majority of Americans live beyond their means…look at our lackluster savings rates. Credit card ads and those for mortgages promote buying everything you want and deserve and many feel they do. Sometimes people have their credit harmed without even knowing it has happened (which is why I recommend getting your scores checked via an Annual Review with a Mortgage Professional). One client has a very small account and when she moved, the bill did not follow her. She now has late payments showing. Her credit card company has agreed to correct the reporting and we’re hoping this will put her scores back where they were. She was in the 700′s now she’s low 600 and I can’t do the refi (with the mortgage we want) until we fix her score.

  30. Angie, here’s post I did (in the mean time) on improving credit scores. Thelma is a white cat (no clothing is safe in our house…between our blended families, we also have a black cat, Bagara). Thelma I inherited when I bought my last house…the sellers said she was only good for mousing; she was scrawny and not very friendly. They called her Miss Thing. I had to rename her and now she’s a lovable 20 lb pest.

  31. Thanks for the link. I remember that post, and your advice looks good. It’s sort of scary to think that belatedly returning a library book (!) could dent your credit score. Jeesh. We keep a close eye on our record through the annual credit report feature, too…we know a few people who’ve had horrendous problems with identity theft and you can’t be too careful. I’ll look forward to what you come up with in the future!

    We’ve only got one cat, but she’s a longhaired calico. Black, white, and orange hair on the same cat, and lots of it. We just vacuum frequently and have taught our daughters that a few stray cat hairs on the clothes is just part of “accessorizing”. What can I say, we’re hippies.

  32. One of my first cats was a Calico named Rosie. They are fantastic! We’re vacuuming and using lint (I mean, hair) rollers often in our house. We also have an old almost blind Pug. Pet allergies? Don’t come over here! We talk about when they’re gone how we’ll be through with animals and then right away, my husband says, “we’ll need a mouser cat” and then I’ll say “don’t you miss our old retreiver?” who died at 8 of cancer. We have so many pets (3 cats and a pug) from having a “blended family”.

  33. HSBC just declared most of WA a soft or declining market. 5% haircut anyone?

    Fortunately, my understanding is that it ONLY affects the max allowed LTV on a program, but not always the pricing.

    F’rinstance, let’s say a cash out refi max is 95%. Now the max LTV is 90%.

    On the other hand, let’s say that a borrower is at 70% LTV on a CO refi, no hits to price. The 5% haircut does NOT push the price to a 75% LTV CO refi.

    Do you get the same answer Rhonda?

  34. Roger, I’m just going to use one of the many other lenders that we work with (I’ve never been a WaMu fan)…so I haven’t had to “ask the question”…YET. ;) I’m afraid we’ll see many of the banks and pmi companies follow each others moves.

    I’m sure you know MGIC (pmi company) has declared Pierce County as a “restricted market”.

  35. Rhonda-

    I recently refied to a 5/1 Jumbo ARM with a rate of 5.5%, zero points, no prepay penalty, and a flat processing fee of $200. Full documentation was required. Do you know of any program that can beat that?

    Thanks-

  36. Q-Diddy,
    I just spent 2 hours at the DMV to get my teen his permit… (probably TMI…sorry). It totally depends on when you locked, what your loan to value is, if the mortgage was cash out (including if a second mortgage was paid off)…it looks like you included all the other info…based on current rates (I post them here every Friday) it sounds good. BTW…if the 7 ARM is as good or just an 0.125 from the 5 ARM, then I’m just quoting the 7.

    Speaking of rates, tomorrow the CPI is released and it should prove to be another interesting day. Today was a real doozy too…one lender provided 4 rate intraday rate changes…so why not finish of the day spending 2 hours at the DMV.

  37. Rhonda-

    It’s only been 2 weeks since I’ve locked. 70% LTV with cash out.

    Think I can do better now?

  38. Sorry to hear about the DMV thing.

  39. Q-Diddy, I would need a lot more info to price it out. Like I said, from what you’ve told me, it sounds good. Rates went up quite a bit today…as long as you’re really locked then you should be fine.

  40. What else do you need?

  41. Q-Diddy, I just ran a quick scenario in our pricing engine that compares various lenders (I use this for pricing loans for my clients) and you could not get that rate today…you had great timing.

  42. Ok thanks Rhonda!

    Check back with you after a few more rate drops!

  43. I’ll be waiting, Q-Diddy…but I’m not sure if you’re going to get it. CPI comes out tomorrow which indicates inflation so I’m anticipating that rates may increase more tomorrow (or dive) depending on what the report produces.

    How did you select your the person who is providing you this great rate?

Trackbacks

  1. [...] Again…this is just an example from one lender. What does this mean to me and other lenders? Obviously we won’t be using MortgageIt for these programs…we couldn’t if we wanted to…however, other lenders are still offering (as of today) these programs. Much like WaMU declaring most of Washington soft…other lenders are not yet. Mortgage Professionals will opt for lenders who will provide the most options for our clients. Why work with a bank/lender who’s going to discount home values 5% when others are not? [...]

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