PMI (Private Mortgage Insurance) companies are tightening up their standards after getting hit with some heavy losses due to the national foreclosure problem. While conforming loan underwriting standards still techincally allow for 100% or zero-down loans they do require mortgage insurance. Roughly a month ago the PMI providers decided it was in their best interest to stop writing policies unless a buyer puts at least 5% down. So while 100% loans used to be quite the norm, now they're non-existant.
Although this does hurt some buyers trying to buy a home, overall it's good for the industry as the added oversight will certainly allow fewer bad loans to get approved.
Enjoy your Wednesday,
Bill
Showing posts with label conforming loans. Show all posts
Showing posts with label conforming loans. Show all posts
Wednesday, April 23, 2008
Friday, September 7, 2007
Mortgage Mess
So where does all this mortgage mess put us? For a lot of people it's not a good situation. Many people are losing money, jobs and even their homes. I personally know of 12 people here in Austin that lost their jobs through no fault of their own just in the past two weeks.
The people losing the money are the ones that put money towards buying the commercial paper on all these subprime mortgages. And of course the people losing their homes are the ones with these mortgages. Many times the rates rise after the fixed period and the payment becomes too much to bear. But we are at the beginning of a rate adjustment cycle, so why are their so many deliquencies and foreclosures now? Wouldn't it be too early for those few loans to cause all the defaults we are seeing?
The default rate is up because borrowers maxed themselves out on what they could buy and overspent. So if a few small bad things happen to them financially, it can really hurt their ability to pay their mortgage. This is why we see so many of the defaults, the borrowers shouldn't have been put into those loans in the first place.
For all the new borrowers that can get approved for conventional financing, it's actually a really good time to borrow money. Rates are down further than they have been in 8 months for conforming loans under $417,000. Check out www.bankrate.com.
I think we should start seeing everything get better in the next six months. Investors still have money to invest and people are still buying houses. So while the guidelines will tighten, it'll be a much more stable industry and buyers will still be able to get loans.
The people losing the money are the ones that put money towards buying the commercial paper on all these subprime mortgages. And of course the people losing their homes are the ones with these mortgages. Many times the rates rise after the fixed period and the payment becomes too much to bear. But we are at the beginning of a rate adjustment cycle, so why are their so many deliquencies and foreclosures now? Wouldn't it be too early for those few loans to cause all the defaults we are seeing?
The default rate is up because borrowers maxed themselves out on what they could buy and overspent. So if a few small bad things happen to them financially, it can really hurt their ability to pay their mortgage. This is why we see so many of the defaults, the borrowers shouldn't have been put into those loans in the first place.
For all the new borrowers that can get approved for conventional financing, it's actually a really good time to borrow money. Rates are down further than they have been in 8 months for conforming loans under $417,000. Check out www.bankrate.com.
I think we should start seeing everything get better in the next six months. Investors still have money to invest and people are still buying houses. So while the guidelines will tighten, it'll be a much more stable industry and buyers will still be able to get loans.
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