Home › Forums › Financial Markets/Economics › Income to Mortgage Ratios in the new Banking System???
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February 25, 2008 at 2:09 PM #160075February 25, 2008 at 4:19 PM #159746
Deal Hunter
ParticipantDebt to income ratios cannot be considered in a vacuum in today’s credit market. I work in loan advocacy (mostily in loan mods for now) and in commercial lending. There has been a MAJOR shift in approval considerations away from income/debt ratios.
This is counter-intuitive as FICO and property values are in such flux that a lender should depend on the fundamentals such as income/debt ratios in approving the loan. However, this is just not what I am seeing in the market.
FICO continues to be the top consideration with property value as a close second. My theory is that the banks and lenders have relied so heavily on FICO and LTV to determine the INTEREST RATE at which to lend that they just plain don’t know how to value a loan on any other criterion.
Originators, unless they carry their own loans, must still package loans to be sold to Wall Street. Wall Street has yet to give originators new qualifiers, so it’s business as usual at the mortgage desk. A quick approval comes with low LTV and high FICO. Debt/income ratios are all over the place even within the same lending institution.
For example: A recent loan mod I worked on with Countrywide approved a loan with the borrower being 36% negative each month after new payment arrangements. This was on a FICO of 710 and LTV of 95%. Find the logic in that one.
February 25, 2008 at 4:19 PM #160043ParticipantDebt to income ratios cannot be considered in a vacuum in today’s credit market. I work in loan advocacy (mostily in loan mods for now) and in commercial lending. There has been a MAJOR shift in approval considerations away from income/debt ratios.
This is counter-intuitive as FICO and property values are in such flux that a lender should depend on the fundamentals such as income/debt ratios in approving the loan. However, this is just not what I am seeing in the market.
FICO continues to be the top consideration with property value as a close second. My theory is that the banks and lenders have relied so heavily on FICO and LTV to determine the INTEREST RATE at which to lend that they just plain don’t know how to value a loan on any other criterion.
Originators, unless they carry their own loans, must still package loans to be sold to Wall Street. Wall Street has yet to give originators new qualifiers, so it’s business as usual at the mortgage desk. A quick approval comes with low LTV and high FICO. Debt/income ratios are all over the place even within the same lending institution.
For example: A recent loan mod I worked on with Countrywide approved a loan with the borrower being 36% negative each month after new payment arrangements. This was on a FICO of 710 and LTV of 95%. Find the logic in that one.
February 25, 2008 at 4:19 PM #160059ParticipantDebt to income ratios cannot be considered in a vacuum in today’s credit market. I work in loan advocacy (mostily in loan mods for now) and in commercial lending. There has been a MAJOR shift in approval considerations away from income/debt ratios.
This is counter-intuitive as FICO and property values are in such flux that a lender should depend on the fundamentals such as income/debt ratios in approving the loan. However, this is just not what I am seeing in the market.
FICO continues to be the top consideration with property value as a close second. My theory is that the banks and lenders have relied so heavily on FICO and LTV to determine the INTEREST RATE at which to lend that they just plain don’t know how to value a loan on any other criterion.
Originators, unless they carry their own loans, must still package loans to be sold to Wall Street. Wall Street has yet to give originators new qualifiers, so it’s business as usual at the mortgage desk. A quick approval comes with low LTV and high FICO. Debt/income ratios are all over the place even within the same lending institution.
For example: A recent loan mod I worked on with Countrywide approved a loan with the borrower being 36% negative each month after new payment arrangements. This was on a FICO of 710 and LTV of 95%. Find the logic in that one.
February 25, 2008 at 4:19 PM #160062ParticipantDebt to income ratios cannot be considered in a vacuum in today’s credit market. I work in loan advocacy (mostily in loan mods for now) and in commercial lending. There has been a MAJOR shift in approval considerations away from income/debt ratios.
This is counter-intuitive as FICO and property values are in such flux that a lender should depend on the fundamentals such as income/debt ratios in approving the loan. However, this is just not what I am seeing in the market.
FICO continues to be the top consideration with property value as a close second. My theory is that the banks and lenders have relied so heavily on FICO and LTV to determine the INTEREST RATE at which to lend that they just plain don’t know how to value a loan on any other criterion.
Originators, unless they carry their own loans, must still package loans to be sold to Wall Street. Wall Street has yet to give originators new qualifiers, so it’s business as usual at the mortgage desk. A quick approval comes with low LTV and high FICO. Debt/income ratios are all over the place even within the same lending institution.
For example: A recent loan mod I worked on with Countrywide approved a loan with the borrower being 36% negative each month after new payment arrangements. This was on a FICO of 710 and LTV of 95%. Find the logic in that one.
February 25, 2008 at 4:19 PM #160140ParticipantDebt to income ratios cannot be considered in a vacuum in today’s credit market. I work in loan advocacy (mostily in loan mods for now) and in commercial lending. There has been a MAJOR shift in approval considerations away from income/debt ratios.
This is counter-intuitive as FICO and property values are in such flux that a lender should depend on the fundamentals such as income/debt ratios in approving the loan. However, this is just not what I am seeing in the market.
FICO continues to be the top consideration with property value as a close second. My theory is that the banks and lenders have relied so heavily on FICO and LTV to determine the INTEREST RATE at which to lend that they just plain don’t know how to value a loan on any other criterion.
Originators, unless they carry their own loans, must still package loans to be sold to Wall Street. Wall Street has yet to give originators new qualifiers, so it’s business as usual at the mortgage desk. A quick approval comes with low LTV and high FICO. Debt/income ratios are all over the place even within the same lending institution.
For example: A recent loan mod I worked on with Countrywide approved a loan with the borrower being 36% negative each month after new payment arrangements. This was on a FICO of 710 and LTV of 95%. Find the logic in that one.
February 25, 2008 at 4:43 PM #159761HLS
ParticipantDH,
The major shift that you are seeing now is on the back end for loans that were originated with loose standards. They are being generous on the back end now because they don’t want to foreclose if they can keep a FB buried in their debt. Mods are very different than originations.On the current origination side, a low LTV, low DTI and high score doesn’t get a quicker approval than a marginal loan. Conforming approvals are computerized and the answers are spit out within 60 seconds, even for a 680 mid score, 50% DTI and 80% LTV… the rate is the same as a 780 score, 25% DTI and 50% LTV.
I don’t know if there are any conforming lenders that “carry their own loans” today,, virtually all get sold to FNMA, FHLMC or FHA. There are very few exceptions granted, if any.
There are people with high credit scores, low DTI’s.. BUT no equity. When upside down, there is no chance of a refi with a new lender. Many people have not grasped this reality yet.
February 25, 2008 at 4:43 PM #160056ParticipantDH,
The major shift that you are seeing now is on the back end for loans that were originated with loose standards. They are being generous on the back end now because they don’t want to foreclose if they can keep a FB buried in their debt. Mods are very different than originations.On the current origination side, a low LTV, low DTI and high score doesn’t get a quicker approval than a marginal loan. Conforming approvals are computerized and the answers are spit out within 60 seconds, even for a 680 mid score, 50% DTI and 80% LTV… the rate is the same as a 780 score, 25% DTI and 50% LTV.
I don’t know if there are any conforming lenders that “carry their own loans” today,, virtually all get sold to FNMA, FHLMC or FHA. There are very few exceptions granted, if any.
There are people with high credit scores, low DTI’s.. BUT no equity. When upside down, there is no chance of a refi with a new lender. Many people have not grasped this reality yet.
February 25, 2008 at 4:43 PM #160074ParticipantDH,
The major shift that you are seeing now is on the back end for loans that were originated with loose standards. They are being generous on the back end now because they don’t want to foreclose if they can keep a FB buried in their debt. Mods are very different than originations.On the current origination side, a low LTV, low DTI and high score doesn’t get a quicker approval than a marginal loan. Conforming approvals are computerized and the answers are spit out within 60 seconds, even for a 680 mid score, 50% DTI and 80% LTV… the rate is the same as a 780 score, 25% DTI and 50% LTV.
I don’t know if there are any conforming lenders that “carry their own loans” today,, virtually all get sold to FNMA, FHLMC or FHA. There are very few exceptions granted, if any.
There are people with high credit scores, low DTI’s.. BUT no equity. When upside down, there is no chance of a refi with a new lender. Many people have not grasped this reality yet.
February 25, 2008 at 4:43 PM #160077ParticipantDH,
The major shift that you are seeing now is on the back end for loans that were originated with loose standards. They are being generous on the back end now because they don’t want to foreclose if they can keep a FB buried in their debt. Mods are very different than originations.On the current origination side, a low LTV, low DTI and high score doesn’t get a quicker approval than a marginal loan. Conforming approvals are computerized and the answers are spit out within 60 seconds, even for a 680 mid score, 50% DTI and 80% LTV… the rate is the same as a 780 score, 25% DTI and 50% LTV.
I don’t know if there are any conforming lenders that “carry their own loans” today,, virtually all get sold to FNMA, FHLMC or FHA. There are very few exceptions granted, if any.
There are people with high credit scores, low DTI’s.. BUT no equity. When upside down, there is no chance of a refi with a new lender. Many people have not grasped this reality yet.
February 25, 2008 at 4:43 PM #160155ParticipantDH,
The major shift that you are seeing now is on the back end for loans that were originated with loose standards. They are being generous on the back end now because they don’t want to foreclose if they can keep a FB buried in their debt. Mods are very different than originations.On the current origination side, a low LTV, low DTI and high score doesn’t get a quicker approval than a marginal loan. Conforming approvals are computerized and the answers are spit out within 60 seconds, even for a 680 mid score, 50% DTI and 80% LTV… the rate is the same as a 780 score, 25% DTI and 50% LTV.
I don’t know if there are any conforming lenders that “carry their own loans” today,, virtually all get sold to FNMA, FHLMC or FHA. There are very few exceptions granted, if any.
There are people with high credit scores, low DTI’s.. BUT no equity. When upside down, there is no chance of a refi with a new lender. Many people have not grasped this reality yet.
February 25, 2008 at 7:29 PM #159856DoJC
ParticipantFebruary 25, 2008 at 7:29 PM #160153ParticipantFebruary 25, 2008 at 7:29 PM #160168ParticipantFebruary 25, 2008 at 7:29 PM #160172 -
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