August 4th, 2007 10:45 PM by
Hello everyone,
This is my first attempt at blogging so bear with me. If anyone has any ideas for a subject they would like to read about, by all means, give me a call or send off an email.
I am sure that just about everyone has heard of the meltdown that is currently happening in the subprime mortgage market. The credit crunch the Wall Street heavyweights are encountering is making it more difficult to finance all but the best credit "A paper" loans. In the past week the market for the mid-level mortgages, or Alt-A loans, has gone up about 1% for all scenarios. The risk/reward that investors on Wall Street look for is requiring higher interest rates on new loans. There will definately be a shakeout in the coming weeks and months to straighten out this mess.
As of August 1st, 2007, the state of Minnesota's new laws took affect. Mortgage brokers now have a new set of rules to follow. These should, for the most part, be a good thing for the borrowers of Minnesota. Among some of the new laws regarding licensing, brokers must now have a minimum net worth or take out a surety bond to ensure solvency. As well as do background check on individual originators that work under the broker. Brokers must also take at least 15 hours of continuing education to renew their license.
One major drawback of the new law is the abolition of stated income, no doc and no ratio loans. Stated loans are not for all borrowers. Some originators abused the system by saying "this cashier at Target is making $100,000 a year." Along with lenders looking the other way and not checking the reasonability of this income, helped speed the foreclosure problem.
The people that will be hurt most by the new laws are self employed individuals and people that find it difficult to document their income. If someone has a large number of write-offs on their taxes, their income shows as lower than it actually is. If someone cannot claim their entire income it will make it difficult to be approved for a loan. This is the one major area where stated income has a place. Especially for people with good credit that know how to handle the debt load they are placing on themselves.
We will see if all the changes in the law will be held up or if the politicians will tinker with it a little.
That's all for now. I will be sure to write often and keep everyone as informed as I can with what is happening in the mortgage industry.
Joe Springer