The mortgage market, particularly the non-conforming segment, is right now in extreme transition. By non-conforming I mean loans that involve high LTVs and CLTVs, stated or alternate forms of income and asset documentation, distressed credit and similar factors. The secondary investment market for these types of loans is changing big time. Guidelines for these types of programs (which make up a huge part of the purchase financing market) are changing literally everyday.

I speak with RE agents everyday and I and shocked at how many don't have a clue about what's happening in the mortgage markets.

There are going to be lots of horror, fall out stories with borrowers caught in the midst of guideline changes or approvals from lenders that are ceasing operations. Now more than ever you must partner up with good, experienced mortgage professionals who stay on top of the market, have strong relationships with lenders and know how to submit and lock in loans that are not vulnerable to guideline changes from market volatility.

New agent here.

How would a RE agent keep up to date on either the changes taking place with specific mortgage segments OR the general condition of the mortgage market whether it be subprime, non-conforming etc?

What should we read, subscribe to?

Why is so much in transition in the mortgage market?

Thanks

To really answer that question completely would take an explanation of mortgage markets and where mortgage money actually comes from, to make it brief I'll start off by saying that the transition that we are seeing is really a return to normalicy. People like Paul Oaks and Richardson will tell you that before 2001 there were limited loans available for borrowers with these high risk factors like 100% financing for stated income, low credit scores, NOO, open collection accounts and various other risk factors.

During the "boom" years lenders started lowering guidelines to accomodate some of these risk factors and the investors increasingly tolerated higher risk because they liked the high rate of return and the risk was mitigated by the fact that property values were rising and the borrowers were gaining equity through this market appreciation. When the borrowers started to get in trouble they would a) work harder to get out of the distress because they had sizeable equity to protect and/or b) use that equity to refinance their way out of trouble. Defaults on these loans, even with the high risk factors, were relatively low.

As we all know, the market appreciation party is now over for a while so many borrowers with these high LTV, high risk factor loans are upside down with no equity to protect or refinance options. Understandably, these loans are now performing very poorly with some experts predicting that up to 20% or more of the so called "subprime market" may be going into default. With this news, the investor appetite for these loans is going away so the originators must change their guidelines to have loans that are saleable. There is also an issue of investors requiring originators to buy back some of these bad loans which is driving many small and medium sized originators out of business or into BK.

Again, this is a very brief, shallow explaination of a subject that could take pages to exlplain.

As RE agents you folks certainly have enough to know and please don't go crazy trying to be experts at this. Do make sure that you are partnered/aligned with top notch mortgage prosfessionals who stay on top of these changes and know the best methods for protecting deals from being hurt by them (Hint: these mortgage professionals are usually not the ones who scream out the lowest rates and fees). If you are working with buyers who have some of these kinds of risk factors - need 100% financing, NOO, stated income, stated or no assets, FTHBs, bruised credit - let them know that mortgage markets are presently in transition and just because they are pre-approved now does not mean they will still be pre approved later. A sense of urgency should be in order for certain types of buyers.

Amen!

Great posting, I can't think of anything to add other than in this market the last thing any agent should want is to lose a buyer b/c of financing and it's important to be certain the mortgage pro has access to a wide range of products, as SD is saying.

Right now if you go to any stock market web site it is easy to find information. This is good stuff to research becasue it will affect any realtor who sells a house this year. Freddie Mac and Fannie Mae are changing all kinds of guidelines right now. As a mortgage professional I am worried about our future. The changes have really hit home today. I had 2 new construction deals that were great loans for the last 4 months. The loan guidelines have changed an now there is no loan programs available for these customers. The customer maintained the same credit as when we pre-qualified them, but the Market does not want thier loans now. There is nothing they can do to change thier situation besides bring a large down payment. Both deals were 100% stated Income. The customers id nothing wrong and we did nothing wrong. Wall street decided after March 1 no thanks.

I hear you... after March 1st, a lot of the changes in lending guidelines are hitting home. Sorry to hear that you couldn't help the clients.

Regards,

If you want to get deeper into this a good place to check is http://www.brokeruniverse.com and their forum is called the Grapevine. Here's one post from there on the financing meltdown:

http://www.brokeruniverse.com/grapevine/thread/?thread=369624

Warning: sometimes not so nice things are said about Realtors on that site, so please nobody get their feelings hurt.

It seems that not to many Realtors visit the mortgage forum here anyway, they seem to mainly be concerned with marketing issues which is understandable.(They have a raging thread going on up at the top about putting flyers on windshields) However, if you want to close these deals that your marketing so hard for it would be well advised to pay a little attention to the financing side. Again, we're going to see lots of posts here in the comming weeks about deals falling out because of financing issues.

Thank you F***ing Bear Stearns... Two weeks before I was absolutely disgusted with the knowledge and overall tact of our AE, been with Bear for 2 years, now they decide overnight to stop buying seconds? If anyone still needs it, last I checked on Friday, Flagstar bank still offered the 100% Hybrid. Is it just me or was that not a much safer loan than the previous option ARM? By the way, when the stock market crashes people are supposed to pull money out and put it in the 10 year T-Bill, what happened? It's like the investors just discovered the benefits of "mattress money". Rumor has it that American dollar has lost its luster and Germany and China are looking pretty good right about now. Well, what's the answer? How do we get the investors interested in US money again? Easy, raise the rates of return, ie: interest rates... Woo Hoo!!!!!!! Ride the wave baby! I hope a lot of the brokers who decided not to get out of the business when it slowed a little have some reserves built up. It gonna be a bumpy ride. Our Plaza rep came in on Thursday to do a presentation, he couldn't say anything he didn't even know what programs he would still have come Friday, we are literaly getting emails everyday saying such and such company is sorry to inform you that they are closing their doors for good.

One good thing that will come from this, it is going to be a very level playing field among investors, no more shopping around to save .25% or .375% over the last guy. Smaller margins mean little to no YSP which mean borrowers actually can compare different loans on their merit, not which broker is going to charge me less up front. I am sure that will be a concern, but now we can sell value, service, etc and not just throw out rates. Ok I'm done...

Goodbye New Century! NOOOOOOOO!!!!!! Why?!?!?!?!?!?!

Yes, Freemont bit the dust end of last week also. Worst yet, some stock analyst from Lehman Bros. said that the prime market is also vunerable to rising defaults because of recent lax underwriting and downgraded Countrywide's stock.

Fasten your seat belts folks.

Who wants to guess who is next, Option One anyone 2-1 odds, come on any takers? Not sure if the odds reference made any sense...

Wow!! Great stuff!! Where have I been?!! I did not even realize that such a valuable mortgage information resource was available on this forum. I understand, and have been shouting from the rooftops that these days were coming over a year ago. Anyone remember GMAC? So, the question that I have is, where does a REALTOR that works with C and D paper clients turn to get these folks approved without being adversely impacted by all of the changes? I know that someone is still gambling in the lending industry. Also, where do I turn to begin to educate myself on all of the different mortgage products that are available out there?

Well as far as where to put your deals, I would say use a broker that you trust and knows exactly what they are doing. And as far as educating yourself, I think your best bet is http://www.brokeruniverse.com or just wait until the dust settles and have lunch with that trusted broker, you buy. Also, GMAC is still around, they do business as Homecomings Financial though.

And if ever there was a time to prequal your buyers this is it!

I so agree w/Adam about finding a mortgage broker locally you can trust and set up a system whereby that person can help you w/prequals.

I am also active as a r.e. broker, I'm set up w/a web site w/MLS access and another secure mortgage site so buyers can complete a mini app on line, or I can take it by phone or in the office depedning on their preference.

Gas prices are too danged hi ($3/gal here) and time too valuable to drive buyers around all day if they can't buy.

And a good mortgage broker will help your buyers w/credit counseling if need be so that tho it may be 3-6 mos from now before your buyers can really buy but btwn you and your lender it can eventually be done.

As subprime lenders go down, we have to get buyers' credit scores up.

I also have put together a booklet for other agents that helps them understand credit reports and how they work, etc.

Prodigy, did you see the hits Homecomings took today? It sucks because I was right with you on the 6th when you posted it and how much has changed in 7 days. This [censored] is really starting to suck! There is a end in sight

I love homecomings too. Flagstar is still good though, their 100% Hybrid is gone if not locked by tommorow. Damn! Here is a handout for some of the brokers around here, call the people who have these lenders and do a little "consumer advocacy" and let them know whats going on, you will gain a lot of respect from them and may get a re-fi or two.