Mortgage Industry tightening up

We are starting to see some serious tightening in our industry due to the foreclosure rates across the country. The last couple of years have been a bit of a free-for-all for the sub-prime / Alt-A side of the industry. The proliferation of 100% financing programs for home buyers with low credit scores and for investors buying non-primary residence properties has been unprecedented. Unfortunately, those loans are not performing and are ending up in foreclosure.

There have been numerous news articles and no shortage of internal memos about the sub-prime mortgage market tightening up. We are seeing Loan to Value limits being cut back, credit score requirements raised and rates (especially on 2nd mortgages) increasing.

These changes will affect people with credit scores in the sub-660 range the most. We will see the use of LPMI (Lender Paid Mortgage Insurance) programs proliferate in the absence of second mortgage options. The silver lining is this will give home buyers the ability to have just one loan rather than two.