We are still feeling the effects of the subprime mortgage market fallout. Lenders are still tightening the standards and requirements for loan approval. Unfortunately, I believe that they may have now gone too far in overreaction to the defaults in the subprime market.
Some lenders are taking the extreme action of cutting off all alternative lending. Some have tightened the standards to ridiculous levels. In fact, at one lender if you had the documentation and credit score to qualify for an alternative loan you would be able to qualify for a standard one! All this goes to show that the lenders are currently spooked and not thinking before they act.
The subprime mortgage market was ripe for correction. Lenders had become too lax in standards and a change was needed. However, the thing that lenders seem to be forgetting is that the alternative lending and subprime loans were created to fill a need. The need for these types of loans has not gone away. We just need the lenders to take a deep breath and run the numbers the way they did when they first developed the alternative products.
I'll keep you posted to the changes as they happen.
As always, any comments or questions are welcome!
Brought to you by Professional Mortgage Group, Inc. in Columbia, Missouri.
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