Even though historically it’s been called ‘non-conforming’ - during the past decade or so it picked up the classification of ’subprime’ - which these days gets a knee-jerk negative reaction from most people. It’s my feeling this next-generation of lenders may utilize a different title, my guess is it could be Non-Agency or Non-Traditional. Although throughout my long career, I know it to be Common Sense Lending; considerably different from the foolish and reckless standards utilized by the amateurs who ran the industry sector this past decade!
I can’t wait until our future parent company, has it’s new wholesale lending operation in full swing, as today the public only can get help if they are on the extremes of the spectrum Fannie/Freddie at one end and FHA at the other. As I see it, the coming big issue is the huge potential losses at FHA, which I and some others have long predicted . Their default rate is currently 7% and their reserve fund has fallen to 3%. With a Government bail-out of FHA becoming more likely each month, it would be tragic for there to only be Fannie and Freddie available to Americans who need home loans, since their loan standards do not address most middle american family.
My preference is 'Portfolio Quality'™ as the new term for the type of Common Sense Lending which helps those borrowers in between the two Government programs Fannie/Freddie and FHA.
But first, what is Common Sense Lending? I bet you know industry people who are mostly clueless about what makes up a qualifiable borrower, in fact since genuine underwriting isn't taught to most new people in the industry vs. the old days when everybody started with that training - it's a real challenge today to get the other guy to actually know what Common Sense Lending actually is (without intense training & education). I've written quite a bit about the 3 C's of Credit that's the foundation of it (both here in this forum and others - you can Google me for others) ... you get the feel of it by doing. In my own case, when I was a snot-nosed twenty-something beginner in the lending industry, I made (supervised) credit decisions (either approved or rejected or counter-offers) to probably a couple of thousand borrowers before my first employer trusted me to do it on my own.
Here it is again is a few words: "In a nutshell, applicants who have a satisfactory credit history, with no recent significant credit problems, who can document their ability to repay the loan in a timely manner, and who appreciate the sanctity of their payment’s due date."
In conclusion, all I can say is if you're gonna work in MY industry, Learn It !!
SAFE Act Adopted in 48 States
In what is being hailed as practically warp speed for legislation, all but two states have now acted to implement provisions of the federal Secure and Fair Enforcement for Mortgage Licensing Act. Signed by President Bush on July 30, 2008, the SAFE Act gave states one year to pass laws requiring the licensing of loan originators according to national standards and start participating in the National Mortgage Licensing System. As of Aug. 8, 48 states and the District of Columbia have done so. California is expected to comply this month or next, leaving Minnesota as the lone holdout. The states have been aggressive, Bill Matthews, president of the Conference of State Bank Supervisors' subsidiary which runs the NMLS, said at the American Association of Residential Mortgage Regulators' annual conference in Savannah, Ga. "You tell me anytime in history that all states have acted so quickly? This is a huge lift," he said. AARMR Secretary Rod Carnes of North Carolina's Department of Banking and Finance, agreed: "I think this speaks volumes for the states." Mr. Matthews said CSBS is now in the process of adding "functionality" to meet the SAFE Act's other requirements, including a streamlined renewal component and consumer access.
FHA Officials See Strong Demand for SF Loans
Federal Housing Administration officials expect to insure over two million single-family loans in fiscal year 2009, which ends September 30, and 2.25 million in FY 2010. During the first three quarters of FY 2009, FHA endorsed approximately 1.39 million loans totaling $255.8 billion. To reach two million, FHA will have to endorse over 600,000 mortgages in the final quarter. The latest "FHA Outlook" report shows the agency insured 197,600 loans, including FHA-insured reverse mortgages, in July, which is a new record for the agency. "Given our expectation that FHA loan volumes will continue to be high until the credit crisis passes, we have just received authorization by Congress for the authority to endorse up to $400 billion for FHA insurance and are asking the same for next year," FHA commissioner David Stevens said in an Aug. 14 speech that was just released by the agency. Based on average loan size, FHA loan volume will hit $367.5 billion if two million loans are endorsed. EXCEPT as I mention above, for the fact that they've got 7% Defaults and only 3% Reserves ... here comes yet another Government Bail Out!
FHA Won't Implement HVCC
The Federal Housing Administration has no plans to implement the Home Valuation Code of Conduct, Commissioner David Stevens told a delegation from the National Association of Mortgage Brokers. NAMB's FHA chairman John Councilman, who attended the meeting, reported that Mr. Stevens said he was well aware of the problems originators have been having with the code, which only applies to loans sold to Fannie Mae and Freddie Mac. That being said, the commissioner added FHA is looking at alternatives it feels would insulate appraisers from pressure from originators. Mr. Stevens also told NAMB that plans for FHA to start risk-based pricing for mortgage insurance on Oct. 1 will not be implemented anytime soon (BECAUSE THAT MAKES TOO MUCH SENSE!). The meeting also clarified upcoming changes in the Real Estate Settlement Procedures Act as it applies to FHA. Mortgage brokers will no longer be allowed to charge discount points starting on Jan. 1, 2010. The 1% fee limitation has been removed, and there is no limit (WHO'S CRAZY STUPID IDEA IS THIS?) as long as the fees are customary to the market. Furthermore, all fees, including those that are charged by the lender, must be lumped into one sum. A yield-spread premium may be charged, but it must be disclosed on a separate line on the good-faith estimate. FHA reserves are higher than they have ever been, Mr. Stevens told NAMB. That being said, he would not rule out that the government would have to bail out FHA because those reserves are projections and those projections could be changed. Still the average credit score for the program has risen from 633 to 693, due to the elimination of what were termed "troublesome programs" such as seller-paid downpayment assistance and cash-out refinancings.
AND, SO I ASK ...what group of unethical/greedy THUGS are steering those 693 scored borrowers into FHA with it's egregious rates & fees? Where's the outrage?
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