Mortgage Update- No Income Verification Products, new lending laws.

[fisherdog19]

As most of you are aware, the mortgage industry is in a lot of turmoil as you read this. Most of this is due to the abnormal amount of foreclosures; mostly due to a mixture of bad loan programs, dishonest mortgage lenders/brokers, and consumer fraud. Rates are still on the low end, which is good, but programs were cut back at a record pace making loans much harder to qualify for. About 4-6 weeks ago, we saw the most change ever seen in the industry. Wholesale lenders went bankrupt on a daily basis, programs disappeared, and underwriting became much more stringent. Subprime lenders took the largest beating, and they are almost obsolete as Fannie Mae and Freddie Mac have come out with programs to take the business away from them. The Alt-A market is just about gone, as I only know of a handful of lenders that even offer No Income Verification products that are not of the Fannie or Freddie nature.

Minnesota, as a state, has recently seen the most change in the industry, on a national level. As of August 1st, a few passed laws took hold and lenders had to start obeying them, with few that are exempt. My company is one of them; first I will briefly explain each law, and secondly, I will explain why my company is exempt.

New Laws

1. Licensing qualification became much more stringent for those who are looking to get thier broker/originator licenses.

2. Pre-payment penalty's on early payoffs or home sales are no longer allowed. For those who will be in a home long term, it may be of benefit to add a pre-payment penalty in order to lower the rate.

3. Lenders and Brokers who are not exempt (most fall into this) are no longer allowed to fund loans in which the borrower cannot verify the income they will use to qualify for the loan (stated income, no ratio, and no doc programs). There is a time and place for these programs, along with a need for them from time to time.

Valesco Mortgage is exempt because we fall under the Federal Charter, as a Federal Savings Bank. This federal charter makes us exempt from many state laws or licensing. This allows our company to continue offering No Income Verification loans and pre-payment penalties, but only those with the highest of credit, and for loans that make sense.

For those of you that are in Adjustable Rate Mortgages, know you qualified under a program in which income was not verified, and think you need to refinance out of the ARM in the same type of loan program, I would suggest you do something quickly about it. Many industry experts feel that these programs will be gone in the near future, and if they do remain, they will under Fannie Mae and Freddie Mac only. Fannie and Freddie are much more stringent in these programs, so qualification requires high credit and stringent underwriting.

Although many mortgage companies are closing their doors, Valesco Mortgage is opening new ones due the honest and professional way we do business. We are currently in the end stages of opening a new office to serve the Twin Cities out of the White Bear Lake area, and plan to serve our new and past clients for many years to come. If any of you ever have any questions, don't hesitate to email or call me at any time. Remember, as an FM member, if you close a loan with me I will cover 10% of your lender closing costs, up to $500.