by Craig
The country voted for CHANGE and nobody can say that we didn't get it!
Everything in the financing world is changing, and I will try to not get political on what I think about these changes because we don't want this blog to be about politics. You would get overwhelmed if I told you about every change in the industry, so we only go for the ones that seem major -- this one is.
Many investors are moving to a 620 FICO score minimum on purchases and refi's. This is strange as FHA might approve a loan for a borrower at 600 scores, but the bank says "we just don't want to have those scores in our portfolios any more because as we bundle the loans together and sell them we can't find investors willing to buy them. So... let's just not originate them."
Our company has been talking about this for a few weeks to prepare us for it, and just today March 6, 2009 sent out a memo stating that today is the last day to register a loan in our system with a mid score at 619 or below.
Sort of like if the hostess invites you to a party and you are "eligible" to get in but the restaurant manager says that you are not dressed in a coat and tie and they have a dress code -- so you don't get in. You're on the list! You have an invitation! But, you don't meet the dress code requirement for that particular restaurant. Problem is all the restaurants (the banks) are starting to all have the same guideline. They all are falling in line.
People who have fallen behind in payments on their homes will not have the credit scores needed so they are all out of luck... "NO SOUP FOR YOU"
What about borrowers who are not behind but are upside down on the value - isn't the government going to save all the home owners in the country through this financial stability plan? The rumors are great and the facts are few in this new deal.
Borrowers who want to refinance loans under the Financial Stability Plan received some facts about the plan this week. The program is designed to assist homeowners whose loans are owned or guaranteed by Fannie Mae or Freddie Mac. Here is a catch: it's only for people who are currently paid up or on time with their payments, and where the loan amount is no more than 105% of the value of the home. Example--- your home is appraised today for $100,000 and your current loan is no MORE than $105,000. If your loan is $106,000 then you don't qualify. The bummer is that today's current values are so much lower than a year or two or three ago that very, very FEW people will have loan amounts that are 105% of their current value.
A website www.financialstability.gov provides guidance on how to determine if a particular loan is owned or guaranteed by Fannie or Freddie and whether the borrower may qualify under this program. They have a bunch of links that you can click on to see what the guidelines are. Some of the documents on that site were posted just in the last 24 - 48 hours.
More details on the program are expected in the next few months.
This is great information for those who are struggling with the current problems of our economy. Thanks for the help, I finally feel like I am armed to face some of the problems that I am experiencing.
Posted by: Phoenix Restaurant Guru | March 09, 2009 at 12:44 PM
hello restaurant Guru -
glad to know you feel "armed" There are some really great experts on this site and you should continue gathering info from and contacting them to get their perspective or advice. They are all quite willing to talk or email!
Posted by: Craig | March 10, 2009 at 03:55 PM