Subprime Loan Guidelines NEW

[CardiffBaseball]

HLS (or anyone) what does the 5 year ARM mean against say the 2-3 year? Are less people willing to take those? The biggest downer I see to this list is the 90%, do you agree that is a tougher requirement? 540 is still pretty low, but I am assuming the documentation thing is pretty big too.

[CardiffBaseball]

HLS (or anyone) what does the 5 year ARM mean against say the 2-3 year? Are less people willing to take those? The biggest downer I see to this list is the 90%, do you agree that is a tougher requirement? 540 is still pretty low, but I am assuming the documentation thing is pretty big too.

[HLS]

It’s a better loan for the borrower. The rate is locked for the longer period. The subprime push of 2 year loans wasnt intended to be a long term loan, but it’s sad how many prime borrowers that should have long term fixed loans are in these sp’s with a prepay that will need to refi.

For short term borrowers or hopeful flippers, they don’t need a 5 YR. Every situation is different.

The intent of a 2YR loan was a band aid. It turned into a crutch.

There is a sp loan today that prices out better than a prime loan. At 65% LTV 5 YR ARM for 5.75%, but it comes with a 3 YR prepay, and you need a 700+ credit score. Less risk to the lender @65%. It’s cheap money today, but only for 5 yrs.

Of course the 90% will restrict many people from qualifying. There are lenders still loaning up to 100%, it’s the qualifying that is more difficult….

[HLS]

It’s a better loan for the borrower. The rate is locked for the longer period. The subprime push of 2 year loans wasnt intended to be a long term loan, but it’s sad how many prime borrowers that should have long term fixed loans are in these sp’s with a prepay that will need to refi.

For short term borrowers or hopeful flippers, they don’t need a 5 YR. Every situation is different.

The intent of a 2YR loan was a band aid. It turned into a crutch.

There is a sp loan today that prices out better than a prime loan. At 65% LTV 5 YR ARM for 5.75%, but it comes with a 3 YR prepay, and you need a 700+ credit score. Less risk to the lender @65%. It’s cheap money today, but only for 5 yrs.

Of course the 90% will restrict many people from qualifying. There are lenders still loaning up to 100%, it’s the qualifying that is more difficult….

[NotCranky]

“HLS (or anyone) what does the 5 year ARM mean against say the 2-3 year? Are less people willing to take those?”

The 5 year arm could be better, if you just want to control cash flow(which is what these things are supposed to be for, but the teaser rate won’t be so low because the banks are postponing interest income further out.In any case now a borrower would have to qualify based on the post reset rate and that basically means only people qualified to go conventional can get the exotic stuff now. That is how it usually is. “Affordability” , using credit, is getting worse and worse even as prices fall, That is a recipe for a snowball.Just add foreclosures, oh yes we have those.Job losses/income/wealth setbacks on deck.

You are right Cardiff, the LTV requirements are much bigger deals. Documentation of income requirements is huge.
Before, a buyer or their mortgage broker could literally enter any fudged income figure and a FICO score and that was it…instant homeowner.

EDIT: Man am I slow!

[NotCranky]

“HLS (or anyone) what does the 5 year ARM mean against say the 2-3 year? Are less people willing to take those?”

The 5 year arm could be better, if you just want to control cash flow(which is what these things are supposed to be for, but the teaser rate won’t be so low because the banks are postponing interest income further out.In any case now a borrower would have to qualify based on the post reset rate and that basically means only people qualified to go conventional can get the exotic stuff now. That is how it usually is. “Affordability” , using credit, is getting worse and worse even as prices fall, That is a recipe for a snowball.Just add foreclosures, oh yes we have those.Job losses/income/wealth setbacks on deck.

You are right Cardiff, the LTV requirements are much bigger deals. Documentation of income requirements is huge.
Before, a buyer or their mortgage broker could literally enter any fudged income figure and a FICO score and that was it…instant homeowner.

EDIT: Man am I slow!

[SD Realtor]

Those guidelines are a good start but to be honest they are still pretty loose (by my personal standards)…

No matter who has been recommending the guidelines, the fact is that they are not law. The reason that the guidelines are finally being put in place is due to the credit crunch that Bugs has mentioned many times over. As the secondary market continues to wallow, loan originators MUST do everything they can to restore confidence to continue to sell loans. That begins with stringent guidelines and a restoration of an underwriting process with teeth.

SD Realtor

[SD Realtor]

Those guidelines are a good start but to be honest they are still pretty loose (by my personal standards)…

No matter who has been recommending the guidelines, the fact is that they are not law. The reason that the guidelines are finally being put in place is due to the credit crunch that Bugs has mentioned many times over. As the secondary market continues to wallow, loan originators MUST do everything they can to restore confidence to continue to sell loans. That begins with stringent guidelines and a restoration of an underwriting process with teeth.

SD Realtor

[HLS]

Without somewhat loose standards, borrowers wouldn’t qualify. It would constrict spending, and the economy would suffer.

When some people use credit cards, they are agreeing to rates up to 30%… Those that use Payday advance have rates up to 400%…. These lenders are taking risks with unsecured debt. Is it the govt’s job to outlaw this ?

Even if 100% home financing is abolished, there will still be those looking to borrow based on their monthly repayment, regardless of rate, and there will be parties willing to loan at some rate.

Car dealers sell cars to the masses based on payments, not rates.

90% home financing several years ago is now 100% (or higher) in many cases.

There is so much paper wealth around, it’s insane. More than ever before.
My guess is that if one quarter of the population wanted to cash out, it would create an economic collapse.

Because people are convinced to stay in the stock market when it declines and hang on to homes in a declining market, it keeps a real collapse from happening. “it’s only a correction….”

There is a small % of homes on the market right now and it is a crisis. People talk about a home still being “worth”
$700K today, but if 25% of people wanted to cash out at the same time, what is that house really worth ?

The same applies to stocks. As long as inventory is held and off the market, and there is a (false) sense of security of “worth” it’s harder to have a real collapse.

1930’s depression cured an entire generation of wanting to hold anything other than cash, and some wouldn’t even put it into a bank. They remembered waiting in line and unable to get it out.

Many people with home equity today are also unable to get it out, as they don’t qualify to get a decent loan.

We are all guilty of complacency today with anything other than cash.
I’m not predicting an economic collapse, but am aware that it could happen. I think that anyone who says it can’t is fooling themselves. I hope that it doesn’t happen.

[HLS]

Without somewhat loose standards, borrowers wouldn’t qualify. It would constrict spending, and the economy would suffer.

When some people use credit cards, they are agreeing to rates up to 30%… Those that use Payday advance have rates up to 400%…. These lenders are taking risks with unsecured debt. Is it the govt’s job to outlaw this ?

Even if 100% home financing is abolished, there will still be those looking to borrow based on their monthly repayment, regardless of rate, and there will be parties willing to loan at some rate.

Car dealers sell cars to the masses based on payments, not rates.

90% home financing several years ago is now 100% (or higher) in many cases.

There is so much paper wealth around, it’s insane. More than ever before.
My guess is that if one quarter of the population wanted to cash out, it would create an economic collapse.

Because people are convinced to stay in the stock market when it declines and hang on to homes in a declining market, it keeps a real collapse from happening. “it’s only a correction….”

There is a small % of homes on the market right now and it is a crisis. People talk about a home still being “worth”
$700K today, but if 25% of people wanted to cash out at the same time, what is that house really worth ?

The same applies to stocks. As long as inventory is held and off the market, and there is a (false) sense of security of “worth” it’s harder to have a real collapse.

1930’s depression cured an entire generation of wanting to hold anything other than cash, and some wouldn’t even put it into a bank. They remembered waiting in line and unable to get it out.

Many people with home equity today are also unable to get it out, as they don’t qualify to get a decent loan.

We are all guilty of complacency today with anything other than cash.
I’m not predicting an economic collapse, but am aware that it could happen. I think that anyone who says it can’t is fooling themselves. I hope that it doesn’t happen.

[JWM in SD]

“We are all guilty of complacency today with anything other than cash.
I’m not predicting an economic collapse, but am aware that it could happen. I think that anyone who says it can’t is fooling themselves. I hope that it doesn’t happen.”

Precisely. This is similar to the point that I’ve been trying to make at this site for a couple of months now. We need to stop being so myopic about the value of real estate in SD…that is not the real issue at hand. How credit and actual monetary assets are perceived and controlled is the issue. Once those issues are forced to be addressed, through financial collapse potentially, the ridiculous out balance issues will self correct, but not without a lot of pain to individuals who are on the wrong side of that correction.

[JWM in SD]

“We are all guilty of complacency today with anything other than cash.
I’m not predicting an economic collapse, but am aware that it could happen. I think that anyone who says it can’t is fooling themselves. I hope that it doesn’t happen.”

Precisely. This is similar to the point that I’ve been trying to make at this site for a couple of months now. We need to stop being so myopic about the value of real estate in SD…that is not the real issue at hand. How credit and actual monetary assets are perceived and controlled is the issue. Once those issues are forced to be addressed, through financial collapse potentially, the ridiculous out balance issues will self correct, but not without a lot of pain to individuals who are on the wrong side of that correction.

[HLS]

It’s not just San Diego, it’s America.
The credit card has changed the economy in the last 40 years, for the worse.
Attitude of entitlement of the recent generation isn’t a good thing.

I’ve been drinking water since I was a kid. People thought I was a freak. Some people now pay more for a fancy bottle of water than they do for gas per ounce. I just heard on the radio that AquaFina is tap water.

Regular coffee isn’t good enough anymore, many are convinced that expensive coffee with multiple names and a sleeve on the cup tastes better. When I was a kid, Sambo’s had a great bottomless cup of coffee for a nickel, but then they couldn’t even keep the name Sambo’s because someone was offended. (THAT is a whole other topic)

The largest generation of seniors who are grossly in debt will be a burden to this country over the next 25 years.

No empire stays on top forever. Roman, British, German, French, Greek all fell. Guess who’s next.

China will own America sooner than you might think. We’ve already sold out, I think that it’s too late to stop it.

Everyone is told (and believes) that if you are invested in the stock market via 401K, IRA, or mutual fund,
“DON’T WORRY” ,,, “You will be ok… It’s time in the market, not timing”…. “it’s just a correction….”

Ask any American over 75 today their views on society.
It’s sad to many of them.

Nobody wants to talk about the decline of western civilization. Global Big business has taken over. Welcome to the 21st century.

I’m a little bit crazy, I’m a little bit scared. I hope that it doesn’t happen. With conviction, can someone PLEASE tell me that I am wrong ??

[HLS]

It’s not just San Diego, it’s America.
The credit card has changed the economy in the last 40 years, for the worse.
Attitude of entitlement of the recent generation isn’t a good thing.

I’ve been drinking water since I was a kid. People thought I was a freak. Some people now pay more for a fancy bottle of water than they do for gas per ounce. I just heard on the radio that AquaFina is tap water.

Regular coffee isn’t good enough anymore, many are convinced that expensive coffee with multiple names and a sleeve on the cup tastes better. When I was a kid, Sambo’s had a great bottomless cup of coffee for a nickel, but then they couldn’t even keep the name Sambo’s because someone was offended. (THAT is a whole other topic)

The largest generation of seniors who are grossly in debt will be a burden to this country over the next 25 years.

No empire stays on top forever. Roman, British, German, French, Greek all fell. Guess who’s next.

China will own America sooner than you might think. We’ve already sold out, I think that it’s too late to stop it.

Everyone is told (and believes) that if you are invested in the stock market via 401K, IRA, or mutual fund,
“DON’T WORRY” ,,, “You will be ok… It’s time in the market, not timing”…. “it’s just a correction….”

Ask any American over 75 today their views on society.
It’s sad to many of them.

Nobody wants to talk about the decline of western civilization. Global Big business has taken over. Welcome to the 21st century.

I’m a little bit crazy, I’m a little bit scared. I hope that it doesn’t happen. With conviction, can someone PLEASE tell me that I am wrong ??

[PerryChase]

HLS, don’t think so much as an American. Think as a citizen of the world. You’ll feel much better.

You can only do what’s right for you and your family. Stick to that and you’ll be fine.

I drink room temperature water, no ice. People think I’m weird. It’s better for your digestion and better for your teeth (no dilatation and contraction that make your teeth more porous over time).

[Author]

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