Fannie, Freddie and refis, oh my
This past week revealed new loan applications at a volume unmatched in 12 years while the number of refinanced loans is down 9.5% in October.
Amy Cavender of Simplified Mortgage Solutions noted, “we are completely back to basics as far as underwriting goes – I’ve not seen it like this in awhile. The pendulum is completely on the opposite side from two years ago. There are really only “vanilla” loans out there right now.”
Residential loans are in trouble, as 9.64% are delinquent, Fannie Mae’s portfolio value declined 27.8%, and Freddie Mac’s portfolio value decreased 21.6% this year.
Cavender said, “I believe 203K loans will be in huge demand based on the type of inventory that’s out there right now – many of the distressed properties need some work. Refinances are down because we are having problems with values. I don’t see it getting any easier any time soon. Many investors are raising their minimum fico score to 640.”
This month’s Standard & Poor’s report noted the fact that so many option-ARM borrowers owe more than when they first bought their homes due to accumulating unpaid interest and a large number of loans bought in the 2004 boom are coming due for their five-year reset when they become standard amortizing loans, throwing many loan-to-value ratios out of whack and monthly mortgage payments more than doubling in some cases.
Buckle up, y’all, we’re in for a bumpy ride.
