We are in the midst of a liquidity crisis in mortgage banking. Silver State Mortgage is deceased. Except for conforming, Meridias Capital is now only brokering loans and reports have surfaced that after August they may shut down. Additionally, Over 105 lenders nationwide have shut down. Major institutional conduit lenders like Bear Stearns have been quoted saying that the current credit crunch is the worst in 20 years. Investor guidelines are changing at an alarming rate - nearly daily.
November 30, 2005 - Home builder, DR Horton’s CEO said “We can earn our way through any economic cycle, except one like the Great Depression…”
July 26th 2007 - D.R. Horton, posted a third-quarter loss Thursday as one of the nation’s largest homebuilders wrote-down the value of unused land and warned there was no recovery in sight for the troubled housing industry.
The CEO of the nation’s largest lender, Countrywide, has sold off tens of millions of dollars of his own stock in an apparent move to completely liquidate his own ownership: http://moneycentral.msn.com/investor/invsub/insider/trans.asp?view=All&Symbol=CFC
In the last three years 14 million homes were refinanced. Of those, 7 million of those loans were adjustable rate mortgages or teaser rate loans. As our investors squeeze us by changing guidelines, Luxury Mortgage Group will continue to tighten our programs and people will be less qualified to refinance.
Many people do not realize that even with an 850 FICO score that certain programs are not available anymore. Very soon we will see Stated Income/Stated Asset and No Documentation Loans completely unavailable! Many loan-to-value maximums have decreased 10% within the past 3 months. Going forward 100% loans will be off the table and other exotic programs will be a thing of the past. Second mortgages will be available only to those that can provide full documentation on their income and assets.
If you have an adjustable rate mortgage, even if it is 3, 4, 5 or 6% interest rate I urge you to make an appointment to discuss refinancing into a fixed rate loan. Additionally, if you need to cash out equity built up in your home the time is now. By stalling, you simply may not be able to refinance or pull money out - even with great income or great credit.
Do not be alarmed by the current state of things.
Instead, prepare for the inevitable.
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