We are experiencing an unprecedented time in the mortgage business.

WHAT HAPPENED?
It began with the sub-prime lending crisis in the spring. New Century Mortgage, one of the largest sub-prime lenders, was one of the first companies to collapse. New Century, like others, was not owned by a bank, but was an independent mortgage company. After borrowers closed on these sub-prime loans, the mortgage companies packaged the loans into mortgage backed securities, and the securities were sold by Wall Street. These securities did not come with any guarantees other than the loans themselves. When borrowers became delinquent in their payments on these sub-prime loans, these mortgage companies were being forced to buy back the loans. When they didn’t have the money to do this, their funding sources for future lending was shut off and these companies were forced to close their doors overnight. More recently, this has occurred with many other independent, non-bank affiliated mortgage companies….American Home Mortgage, First Magnus, Homebanc, Greenpoint and hundreds more. These companies were also unable to come up with the money to buy back their delinquent loans. And thus, their warehouse funding sources shut down their lines of credit, and they could no longer fund any new loans.

In addition, the mortgage backed securities market, other than the FNMA/FHLMC agency securities market, also was forced to shut down. This includes mortgage backed securities composed of jumbo loans and Alt-A loans (stated income or no verification loans). The FNMA/FHLMC securities are backed by a guarantee from the US Government, so these loans have not been affected. Therefore, we’ve seen major changes in the jumbo loan market and Alt-A products. Underwriting guidelines have dramatically been tightened, especially in the documentation required to verify income/assets, higher credit FICO scores required, the amount of downpayment required and the availability of second mortgages.

WHAT’S NEXT?
We will most likely see more mortgage companies close or file bankruptcy. We should see the mortgage backed securities market start buying jumbo loans again because these are quality loans. We will see a substantial increase in FHA/VA financing. Congress is reviewing a proposal to allow the maximum FHA loan to be $500,000 and the LTV increase to 100%. We will see increased usage of mortgage insurance for high LTV loans, and this is attractive because of the deductibility feature. There is growing support for a temporary increase in the FNMA/FHLMC maximum loan amount, so jumbo loans could be sold to FNMA/FHLMC. The Fed just lowered the Fed Funds rate to 4 ¾%, and this has improved the emotional mood of buyers. The Fed stands ready to do more if this is not enough. Long-term….independent, non-bank owned mortgage companies may be gone and independent mortgage brokers will be under great scrutiny and the government will impose increased regulation on them.

WHAT ABOUT HOME MORTGAGE CHOICES?
Home Mortgage Choices is a partnership between Prudential Carolina and Shelter Mortgage. Shelter Mortgage is NOT an independent mortgage company. Shelter Mortgage IS OWNED BY A BANK, Guaranty Bank. Guaranty Bank is a federally chartered bank headquartered in Milwaukee, WI and has been in business since 1923. Guaranty has 185 retail bank branches. The customers of the Bank have deposited funds into checking, savings, money market and certificate of deposits. This money is used to fund our mortgage loans. Over 90% of our loan fundings come from these deposits. Plus, we have $800 million available to borrow from the Federal Home Loan Bank. We have COMPLETE CONTROL over the money needed to fund the loans at closing. YOU CAN ALWAYS COUNT ON YOUR BUYER’S LOANS CLOSING AND FUNDING ON TIME. Home Mortgage Choices has the strength and longevity needed to sustain the mortgage fluctuations in the years to come. Our mortgage partnership began 12 years ago, and throughout the years, we have been aligned in our values, cultures and our ability to make sound business decisions. Our goal as your partner is to help you list and sell more properties and prosper in your business. Courtesy of Jason M. Watkins of Home Mortgage Choices.

Please contact me if you have any questions about today’s Real Estate market.

Elizabeth Whittle
REALTOR
(843) 901-0488
ewhittle@carolinaone.com
www.ElizabethWhittle.com

The thoughts on this website do not necessarily reflect those of Carolina One Real Estate.
Carolina One Real Estate | 877-663-3456
1400 Palm Blvd Suite E, Isle of Palms, SC 29451
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