As a Correspondent Lender, it’s difficult for me to call myself a mortgage broker or a mortgage banker since I’m an odd [photopress:scrooged.jpg,thumb,alignright]mix of both. I’m sure my sister-in-law who happens to be the President of our company would prefer to say the “best of both worlds” and she could be right. This is not what this is post is about. As a correspondent, we work with about 70 or so different lenders and all of their guidelines; the main difference between us and a broker is that we close in our credit line (more like a bank). Although we process, underwrite and draw loan docs at our office, we still get to react to what our lenders send us as far as ever changing guidelines. Here is one example.
At 4:45 p.m. today I received a memo from one of our lenders dated today stating important changes effective tomorrow. I’m honestly not sure if this lender operates based on west or east coast times. The memo states:
[Major Lender] is deeply committed to achieving two extremely important short-term goals:
1) Responding to the current market turmoil in a manner that ensures continued strength and prosperity.
2) Communicating these changes in a manner that reduces confusion and allows you to focus more time and energy on your customers.
As new information is processed regarding loan credit performance, we all must be prepared to react quickly and decisively to eliminate the problem areas….This announcement is the result of feedback received from our investors and has our own analysis of the guideline characteristics that are driving under-performance of some loans, and an exhaustive project involving all areas of [Lender] to find opportunities to preserve the intended value proposition of our products while solving the specific credit problem.
We have new memos constantly being issued per each individual lender we work with regarding what loans they’re wanting and not (what their new guidelines are). We’re going through another “tightening” with underwriting. Here are a few samples of what I’m witnessing from various lenders:
- Credit based pricing all ready in effect for Fannie/Freddie (conforming) loans. (Some banks are taking advantage of the circumstances and are increasing the rate now. Possibly to re-coup current or future losses).
- Non-conforming mortgages topped out at a 90% total loan to value.
- Stated income and no-income verified mortgages are the ghost of Christmas past.
- 45% debt to income ratios for non-conforming no matter what your AUS (computer response) says.
- Second mortgages are less available (we’ve gone from several lenders offering them to just a couple).
- Bridge loans are less available.
Not all lenders (banks) have the same guidelines so as a Loan Originator who has many lenders to work with, you need to know you client and put on your dancing shoes! As a potential home buyer or someone considering a refinance, the more time you have to work with a Mortgage Professional to get yourself in the best postion to have a mortgage, the better off you will be.