Lending this week

 I would be especially interested in hearing the opinions of mortgage brokers about this matter.  I have talked with several mortgage brokers this week, what they’re now telling me is that the ability to take out a second mortgage on your house is probably not going to happen until the markets settle down.  Stated income are probably not going to happen either.  Loan to value requirements can go as high as 95% non owner occupied (NOO) and 100% owner occupied (OO).  With 80% loan to value, OO loans go 6.4% and NOO loans will be higher.  4-6 months capital reserves of principal interest tax and insurance (PITI) payments are required.  I’m told that NOO maximum debt to income ratio is 45% and OO debt to income ratio can go as high as 63%, and that income is gross income plus 75% of rents.  I am told by my mortgage brokers that the current panic should be gone by the fall, and that next year at this time, mortgage lending rates will in all likelihood be lower.

Sounds about right, here are some corrections/additional points:

  • The majority of NOO programs require between 6-12 months of PITI
  • The 2nds market has been seriously hampered as some of the major players (companies like Aegis, National City, etc.) have either discontinued or been forced to shutdown.
  • Jumbo mortgages are the latest to feel the wrath of disdain from the secondary market.
  • I question the allowance of a 63 DTI for OO transactions.
  • I expect the widening of spreads and tightening of terms/guidelines to persist for the remainder of the year (and perhaps trickle into the 1Q of the next year).
  • The FED just pumped in 38BB of liquidity to allay investor concerns—anyone considering refinancing or purchasing now should move along to the rate lock ASAP in order to take advantage of of any momentary calm in the storm resulting from the FED’s cash injection.


Scott Miller