Good Bye 100% Hope to See You Again Soon!

Well the bottom "may have" hit as far as underwriting guidelines go this morning. I was just informed that the maximum loan-to-value (ltv) that MI companies will now ensure is 97% (Effective April 1, 2008). This also applies to the ever popular and state specific Missouri Housing Development Corp. or (MHDC) program. After speaking with Don Brinker, Managing Director for the MHDC program the main problem they are having is the appetite for there bonds. In the past companies like Fannie Mae, Freddie Mac, Bear Stearns and Lehman Bros. would purchase the state issued bonds. However, with the "liquidity and credit crisis" Fannie and Freddie have stopped purchasing the bonds all together and "the other" investors like Bear and Lehman want a premium return (i.e. higher interest rate) so the bond basically becomes ineffective. The last bond issue was at 5.99% and the latest bid for the bond was around 7%, therefore there are currently no MHDC funds available until the end of April and unless the appetite for these bonds increases there may be no funds period until the market returns to some normalcy!

There are 7 major mortgage insurance companies (Genworth, MGIC, PMI, Radian, RMIC, Triad and UG/AIG) the one synopsis with all of these insurers is that they will no longer insure 100% financing. Their credit requirements however vary; some require a minimum of 680 while others require a 620. So for now the "floor" (speaking in terms of mortgage financing) is 97% ltv, full-documentation with at least a 620 credit score (Fannie & Freddie speaking).

I cannot begin to tell you how hard being a true mortgage professional is right now! Mortgage rates are the most volatile I have seen in 10 years, underwriting guidelines are constantly changing, lenders are closing their doors, MI companies are changing the rules of the game, and all the while the nationally economy is in a deepening recession! I spend approximately 3-4 hours of my day doing research on everything imaginable regarding the economy and the mortgage industry and I still cannot keep up with all the changes. I subscribe to over 20 websites that constantly send me updates, graphs, and expert opinions and I still feel overwhelmed. As I type this post I have a nagging headache that simply won't go away. However, now that I am done "venting", let me tell you that quality financing programs are still available and at "fair" rates. I cannot speak enough to the fact that if you are not working with a "true" mortgage professional then you better be! Future homeowner's need honest advice on programs, rates, the home buying process, market trends, the Columbia economy, the national economy and to some extent future predictions.

I truly believe we are at the "bottom" as far as possible guideline changes are concerned hopefully in the future (6-12 months) we will see some "normalcy" with lenders, investors, and insurance companies. But for now these are the "rules of the game" that we must all play by.

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