Mortgage Insider

Here is an update from my perspective in mortgage lending as a loan officer:

First: people are still going to lending tree and getting totally hammered on fees and loving it. How stupid is that?

Second: If your credit ain't perfect the market is so radically changing it's scary.

Third: If you like your loan officer you will close with them. If you don't, you'll go somewhere else.

Since one and three are old news I'll get to the why of #2.

In the old days of mid 2005 there were hundreds of companies funding paper from brokers on less than perfect credit deals. Maybe you have heard of Wells Fargo or Saxon, but you have never heard of MLN or Sebring?

How those guys all worked was to write a check on a humongous credit line and fund the loans. Then they would go to their top three money guys who represent those investment fund groups where your 401k money is parked. Those guys would review the "stack" of loans and decide if they wanted them. If they like them, they wrote a check and took them. The investment guys never really understood how mortgage people make money so they just kept a small distance and protected themselves- at a margin cost because nobody works for free.

On the borrower's side that's where the note comes in the mail that your mortgage payment is going to Buffalo instead of Atlanta or Chicago instead of Tempe... etc.

Then something strange happened. The guys from those big investment houses finally decided to remove the middle man or at least eliminate a step. Leahman brothers, Bear-Stearns, ING, Dewey Cheatham and Howe-- or whoever just went out and wrote a big freaking check and bought the companies that were funding those loans. When that happened, they stopped buying stacks of paper from the myriad of companies selling them and only bought their own companies funded loans.

Time for pink slips. Old time big alternative paper lenders started dropping like flies. Sebring, Mortgage Lenders Network, and we are all betting Freemont to be next are going down. Decision 1- bought by household just 3 years ago- is seeing some serious rumors about a demise. Option 1 (owned by HR Block) has not made money in ages and has been for sale- not good omen.

If you have heard of Centex you will be happy to know you will never get a loan from those theiving jerks again. They are long gone. Same for Oak Street / Crestleigh Bankcorp and even United Financial Mortgage Corporation. All gone bye-bye. The death of these companies is a good thing for consumers, none of them ever closed a loan for less than 5% fees on the FRONT with up to 4% on the BACK on TOP of that outrageous fee!

Anyway, the market for low-credit-first time homebuyers is drying up thanks largely to a 30++% foreclosure rate in that paper last quarter. Thanks a lot! Ruin it for everyone! You have to have a 620 middle credit score and some reserves to do anything now. A year ago I could get a 560 score with no reserves and outstanding collections done at 100%. The 100% on a 580 can still be found but is harder to close than ever.

Did I mention that Equifax is still selling your mortgage and social security number information to anyone who wants it?