No Credit – Run For The Hills!

• + SHARE | SAVE | EMAIL THIS POST

Today I spent some time reconnecting with a few friends in the retail mortgage business. My idea was to determine the reality of the current lending climate and just what the latest mortgage lending guidelines require. And more importantly, is anyone funding loans out there?

A number of comments really jumped out at me, including:

• Until this week, Fannie Mae was still accepting “stated” or “liar” loans, however, Freddie Mac is still allowing them.
• The Federal Housing Administration is filling much of the gap, and in some cases, providing financing up to 97% loan-to-value (“LTV”). For example, even if you have a really low credit score in the 500’s, but you are able to show consistent payment history in the past 12 months, then you may qualify for up to 97% financing.
• Foreign National financing has been drastically cut back to a maximum LTV of 60%, however, these loans still require minimal documentation. 
• A few banks are still accepting ”stated” assets, therefore no sourcing or seasoning of reserves or downpayment is required.
• Mortgage insurers, excluding PMI, are no longer providing mortgage insurance on condominiums in Miami-Dade County and/or the state of Florida, therefore, max loan-to-value ratios on a condo are capped at 80% of purchase price or appraised value.
• A borrower with an 800 credit score, 18% debt-to-income ratio, could not obtain mortgage insurance to cover his 85% LTV, rate and term refinance, on his condo in Miami Beach.

In order to verify the information provided to me by my resources, I actually looked at the current FHA guidelines posted by Senderra Fuding. You may be quite surprised to read that “The Minimum FICO score for an Approve/Accept is 500″, and “Property Seller Contributions can not exceed 6%”, just to quote a couple of the guidelines. For more detailed information on FHA guidelines, please downloand FHA at a glance.

I hear that Countrywide, Bank of America, ING, Senderra Funding, AmTrust and several other banks all funded loans in south Florida this week. And 97% financing from the FHA with poor credit, no wonder why they are calling it the “new subprime!”

As far as running for the hills, please!

SUBSCRIBE