underwriting guidelines?

[kev374]

I was talking to a mortgage broker yesterday and he had mentioned that these days all loans have to go through 2 underwriters minimum. Also, if the loan defaults within the first 6 months it is automatically being sent to the FBI to cross check for fraud.

He also mentioned that “stated income” has become the 4 letter word of the industry…nobody wants to hear those words within a mile of their premises.

[HereWeGo]

The latest from Paul Muolo seems to back that up.

[HereWeGo]

The latest from Paul Muolo seems to back that up.

[HereWeGo]

The latest from Paul Muolo seems to back that up.

[patientrenter]

How can you underwrite for possible price drops of 20-40% in the next 5 years? If you think this is a real possibility, then it seems no loan should be made unless the buyer has at least 20-40% of a downpayment of their own money, net of a hard-headed realistic current appraised value. I don’t see how you can charge enough on a 95%, or even a 90%, loan to cover the risk. If there’s a 50% chance of losing 20% of the loan principal 4 years from now, for example, then you’d have to charge 250bp extra, and that’s with spotless credit.

Do any of the mortgage experts here think rates on new 90% LTV 30-year fixed jumbo mortgages to people with spotless credit is going to be at least 250bp over the risk-free conforming rate for the next 12 months or more, not just this month? Unless that happens, there’s inadequate compensation for the risk to the lenders, and either the taxpayers will have to subsidize them thru’ FNMA insurance etc, or else investors will eventually quit feeding this kind of dumb money to buyers when they finally realize the price drop will go beyond 5-10% in places like Southern California.

Patient renter in OC

[patientrenter]

How can you underwrite for possible price drops of 20-40% in the next 5 years? If you think this is a real possibility, then it seems no loan should be made unless the buyer has at least 20-40% of a downpayment of their own money, net of a hard-headed realistic current appraised value. I don’t see how you can charge enough on a 95%, or even a 90%, loan to cover the risk. If there’s a 50% chance of losing 20% of the loan principal 4 years from now, for example, then you’d have to charge 250bp extra, and that’s with spotless credit.

Do any of the mortgage experts here think rates on new 90% LTV 30-year fixed jumbo mortgages to people with spotless credit is going to be at least 250bp over the risk-free conforming rate for the next 12 months or more, not just this month? Unless that happens, there’s inadequate compensation for the risk to the lenders, and either the taxpayers will have to subsidize them thru’ FNMA insurance etc, or else investors will eventually quit feeding this kind of dumb money to buyers when they finally realize the price drop will go beyond 5-10% in places like Southern California.

Patient renter in OC

[patientrenter]

How can you underwrite for possible price drops of 20-40% in the next 5 years? If you think this is a real possibility, then it seems no loan should be made unless the buyer has at least 20-40% of a downpayment of their own money, net of a hard-headed realistic current appraised value. I don’t see how you can charge enough on a 95%, or even a 90%, loan to cover the risk. If there’s a 50% chance of losing 20% of the loan principal 4 years from now, for example, then you’d have to charge 250bp extra, and that’s with spotless credit.

Do any of the mortgage experts here think rates on new 90% LTV 30-year fixed jumbo mortgages to people with spotless credit is going to be at least 250bp over the risk-free conforming rate for the next 12 months or more, not just this month? Unless that happens, there’s inadequate compensation for the risk to the lenders, and either the taxpayers will have to subsidize them thru’ FNMA insurance etc, or else investors will eventually quit feeding this kind of dumb money to buyers when they finally realize the price drop will go beyond 5-10% in places like Southern California.

Patient renter in OC

[JWM in SD]

Precisely PR. See HLS’s responses about hard money lending in the absence of reliance on credit scores.

This is why I have drawn the analogy to the Sarbanes Oxley act in the wake of Enron and Worldcom. Those 2 events were minor compared to the magnitude of this credit bubble. Yet many posters here continue in their SD is different fantasy land. No, it isn’t.

Bernanke does not give a shit about anyones SD home or condo and neither do the investors of MBS or CDOs.

[JWM in SD]

Precisely PR. See HLS’s responses about hard money lending in the absence of reliance on credit scores.

This is why I have drawn the analogy to the Sarbanes Oxley act in the wake of Enron and Worldcom. Those 2 events were minor compared to the magnitude of this credit bubble. Yet many posters here continue in their SD is different fantasy land. No, it isn’t.

Bernanke does not give a shit about anyones SD home or condo and neither do the investors of MBS or CDOs.

[JWM in SD]

Precisely PR. See HLS’s responses about hard money lending in the absence of reliance on credit scores.

This is why I have drawn the analogy to the Sarbanes Oxley act in the wake of Enron and Worldcom. Those 2 events were minor compared to the magnitude of this credit bubble. Yet many posters here continue in their SD is different fantasy land. No, it isn’t.

Bernanke does not give a shit about anyones SD home or condo and neither do the investors of MBS or CDOs.

[HLS]

In my opinion 25% equity isn’t enough of a cushion to offset the risk.
I try to avoid the Hard Money guys, but know that some are busy.

When they start asking for 40%-50% equity, I’ll let you know. 😉

There was one major lender whose claim was that they weren’t credit score driven. They really amused me.
They would cut legitimate appraisals by 10%-15% an that was several years ago. They were a bit more careful then because they were doing the neg am loans and allowing them to max out at 115%. TA-DA !!

[HLS]

In my opinion 25% equity isn’t enough of a cushion to offset the risk.
I try to avoid the Hard Money guys, but know that some are busy.

When they start asking for 40%-50% equity, I’ll let you know. 😉

There was one major lender whose claim was that they weren’t credit score driven. They really amused me.
They would cut legitimate appraisals by 10%-15% an that was several years ago. They were a bit more careful then because they were doing the neg am loans and allowing them to max out at 115%. TA-DA !!

[HLS]

In my opinion 25% equity isn’t enough of a cushion to offset the risk.
I try to avoid the Hard Money guys, but know that some are busy.

When they start asking for 40%-50% equity, I’ll let you know. 😉

There was one major lender whose claim was that they weren’t credit score driven. They really amused me.
They would cut legitimate appraisals by 10%-15% an that was several years ago. They were a bit more careful then because they were doing the neg am loans and allowing them to max out at 115%. TA-DA !!

[Author]

Posts