Changes in the Mortgage Business

What are some of the changes that are happening in the mortgage business?

“The times, they are a-changing’”. Bob Dylan gave those words to us in 1964 and they couldn’t be more appropriate in today’s mortgage market. Even though interest rates remain at a consistently low level, we are experiencing a conservative ‘belt tightening” from all of the lenders in the housing market. Buyers that would have qualified with few or no problems as recently as sixty days ago are now being required to fulfill conditions that may preclude them from getting the loan to purchase their home. There are too many changes to adequately address in this limited space, but let’s look at some of the changes that are significantly impacting our systems.
No down payment programs are virtually a thing of the past. During recent years no down payment home purchase programs have been available to a large segment of our population. The programs targeted 1st time homebuyers and allowed them to acquire their first home using underwriting standards that were drafted with that home-buying population is mind. The loans were underwritten and funded with a requirement for private mortgage insurance (PMI), which offset a portion of the risk assumed by the lender. Unfortunately, the meltdown of the sub prime mortgage market has affected other mortgage market segments and PMI is no longer available for higher risk loans, thus effectively eliminating the zero down payment programs. The only exception to the no down payment rule is the home purchase program available to veterans through the Veterans Administration and some down payment assistance programs available through non-profit corporations and our Native American tribes.
An issue that is related to the same underlying problem of a deteriorating housing market is the stricter underwriting guidelines that have been adopted by local and national players in the mortgage industry. Some of the challenges that a mortgage client might encounter are: more documented cash reserves; closer scrutiny of the property appraisal report; increased amount of down payment; and increased length of time to process and close a loan. Changes in requirements seem to change daily and the rules of even six months ago no longer apply. That is why the services of an experienced professional are even more important today than they have been in the past.