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August 17th, 2007 9:17 PM

Dear Friends,

This past week has created a tremendous amount of activity in the financial markets.

The continued devastation of the mortgage industry due to the sub-prime fallout, has compelled the Federal Reserve to become involved by lowering rates and depositing billions of dollars in the marketplace to help liquidity and to end the 'credit crunch'.

While these actions were generally seen as beneficial by financial concerns, the future of the mortgage industry in particular has added a sense of anxiety to many bankers and financial companies.

HomeOwners who possess Option Arm & Interest Only type loans will see their mortgage reset to a higher monthly payment.

In theory, many of these homeowners will be unable to pay their higher mortgage payment when this occurs.

In turn, they will be unable to refinance their homes due to the inability to secure credit, where many underwriting guidelines have changed to the detriment of the borrower.

As mentioned in our previous TEAMBLOG, many lenders are no longer providing financing for Stated Income borrowers with lower middle Fico scores and higher LTV or Loan To Values. Many loans over 80% of the appraised value are difficult to obtain if one does not meet these higher requirements. Another variable to this circumstance revolves around the fact that many homebuyers purchased these properties with no money down. 100% financing was easily available just a few months ago. 

Moreover, the depressed home values caused in large part by the current influx of additional foreclosures has exacerbated the problem as equity in the property no longer exists. This circumstance has created a situation where refinancing one's home could be construed as an exercise in futility.

We are currently witnessing a dramatic change and a shift in the way one goes about in securing a mortgage loan. This 'correction' in the mortgage business has just begun.

In our next TEAMBLOG, slated for Tuesday, August 21st, I will have additional thoughts and explore plans MONEYTEAM will employ to help those facing these challenges.

Thanks Again

 

 


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Posted by Jesse Dorado on August 17th, 2007 9:17 PMPost a Comment

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