EVERYONE knows that the mortgage rates are really at its Historic Lows, we are talking about 3.25%- 3.5% for your 30 years fixed rate mortgages. I noticed that these are really helping homeowners who already had 4% six to eight months ago, now able to refinance again to a 3.25% – 3.5% rates with absolutely no cost. These very qualified home borrowers have plenty of equity are in now way in any hardship, they mostly have good secured jobs. Ask yourself: do they really need more help from Mr. Bernanke?
How about someone who is struggling to pay their mortgage with minimal equity to no equity, where is the help for people like that? They probably have rates above 5 that they can’t shake off, is this fair to them?
If lenders were only a little less picky, home sales and jobs could increase dramatically, according to the professional association.
Do you agree? I certainly do. I just don’t understand why they are not seeing that by easing lending guidelines, that will immediately spur Real Estate Sales and help boost jobs starting with the contraction all the way up to banking and services. I am hopeful that they have something up their sleeves.
This is how lenders divides creditworthiness into three categories: prime borrowers, whose FICO credit scores are 660 and above, Alt-A borrowers with FICO scores between 620 and 659 and sub prime borrowers, whose FICO scores are below 620.
Listen to these numbers and you will realize that if your credit is in the medium category you are not the majority type borrower that the lenders are willing to help, here they are: Last month, 53 percent of mortgage loans went to borrowers with credit scores above 740, according to the realtors group. Meanwhile, the average FICO score for borrowers denied an FHA loan last May was 669.
If the lenders are willing to make lending guidelines tailored for more loans for the average Joe, this is what Lawrence Yun, Chief Economist of NAR (National Association of Realtors) “ re-examining regulatory rules to allow more relaxed, “sensible lending standards” could lead to 500,000 to 700,000 additional home sales in the coming year and 250,000 to 350,000 jobs in related trades and services.”
Wow, that would be the magic wand that will kick start this RE market and hopefully the entire economy to get back on its real feet.
I do understand that the lenders still are healing from the previous downturn and collapsing of the entire Banking system and that they are also not fully recovered yet. But I do believe that the economist know exactly when to come out with more lenient guidelines for the homebuyers and borrowers. And I am sure that it will be the next few years this easing will occur, makes you wonder is this politically motivated? Of course it is! Once November elections are done with, then we shall see who has been suppressing the RE market and we will realize that political manipulation is common among not only the third world countries but also our America. The Romans did not get that strong without their political ties and influences, it’s a century old game that is played by the political warriors.
Don’t expect the loosey-goosey standards we had in 2005 through 2007”: minimal documentation of income and assets, zero down payments and a widespread disregard for applicants’ ability to afford payments on the mortgages they sought. That will never happen again in our lifetime.
Fannie Mae, the other dominant investor along with Freddie Mac in the conventional mortgage market, is planning an overhaul of its automated underwriting system in October. Fannie’s system plays a huge role far beyond its own business, since lenders often submit borrowers’ application data through it to get a quick read on whether a loan meets the baseline tests for eligibility, even if the mortgage is destined ultimately for FHA, VA or a bank’s portfolio.
While Fannie Mae officials insist that the coming changes to credit-risk evaluation and other factors won’t significantly alter the rate of approvals that the system generates, they concede that some applicants now getting green lights for loans won’t get them and others who are now on the margins will sail through.
Other signs that the lending industry may not be quite ready to loosen up: In the latest quarterly survey of banks conducted by the Office of the Comptroller of the Currency, 25 percent said they had tightened rules for mortgages in recent months, whereas just 10 percent said they had eased their standards. About two-thirds said their rules remained the same.
Also, a study by mortgage data firm Ellie Mae of new loans closed in June found that credit scores for approved mortgages remain extraordinarily high. Fannie and Freddie’s refinancing had an average FICO score of 767 and an average equity percentage of 29 percent. Home purchase loans had average down payments of 21 percent and FICO scores of 763. Even the conventional home purchase loan applications that lenders rejected had quality characteristics that were high by historical standards: 738 average FICOs and 19 percent down payments.
FHA, which used to average in the mid-600s for FICO scores on approvals, appears to be continuing to cherry-pick applicants as well, based on the Ellie Mae survey data, which the firm says represents about one-fifth of all loans originated in June. FHA’s average FICO on approved refis was 716, up three points from May. For successful home purchase applications, the average was 701.
What does all this mean? If there’s a loosening of underwriting standards coming down the road, there are very minute hints of it at the moment. Sorry to say.
But if you have higher than norm rates and think you can refinance, this is the best time to call and see if we could reduce your payments by a couple of hundred dollars without a cost.
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Thanks for your inquiries and comments, please call Ken Go of 1st Innovative Finance Group for your future mortgage or Real Estate Needs call 562-697-7028 or write to [email protected].
