Traditional Lenders Lock Out Iffy Borrowers
I see searches in my site logs asking if subprime loans are still available. About a year ago, I wrote they were and that was true up until very recently. However the stated income and 100% financing loans went away in August 2007. Today I received news my biggest remaining subprime lender is exiting that business as well.
This lender is a major company that has consistently been conservative in its policies and didn’t expect much fallout in their business. When the other major lenders dropped subprime in the last year, this lender kept the program, though it was quite limited. Today I received the following:
NON-PRIME PROGRAM will be eliminated…this includes bank statement loans and any score below a 650.
Tightening for prime programs was announced as well -
Purchase Money Transactions
· Limited to 85% LTV in 1st and 2nd Position
Refinances:
· Limited to 90% LTV in 1st position
· Limited to 85% CLTV in 2nd position
· 50% DTI allowed on 1st position fixed products
· 2 yrs required on title if LTV is > 80%
It gets worse - 45% maximum DTI on any of these loans.
And if you’re buying in the following States, the requirements are even tighter -
Please refer to the rate sheet for lower LTV’s in the following markets:
· California
· Nevada
· Arizona
· Michigan
· Florida
Lower than 85%? You bet. This lender is scared. Who’s going to take up the slack? The government. I’ll have a post soon discussing the increased role government loans will take and why that’s not necessarily a bad idea.
Are there still subprime loans available? Believe it or not, there are. I just started getting rate sheets from a new lender I’ve never heard of offering a variety of subprime loans including stated income…but you’ve got to have 30% down and the interest rates are double digits. Now compare that to FHA’s 3% and you’ll understand that subprime is essentially dead.