Jan
4
Most consumers really don’t know much about the mortgage world. I know I didn’t before I got into the mortgage world. The extent of my knowledge was applying for a loan, getting hosed (e.g. fleeced) on fees at closing and then having to pay a mortgage payment every month. What I didn’t know was that my mortgage was never truly held by the company that I made payments to, they simply serviced my loan. Mortgages are packaged as mortgage backed securities and sold on the secondary market i.e. Wall Street.
Subprime mortgages or loans with less strict underwriting standards have followed the same process of selling their loans on the secondary market but with dismal results. Due to the multitude of delinquent payments and ultimate foreclosure on subprime loans, these loans are being rejected by Wall Street en masse. Several subprime lenders have already shut the doors: Mortgage Lenders Network, Ownit Mortgage, Sebring Capital with many more on the horizon. In other words, we’re headed for a sub prime meltdown of epic proportions.
What does this all mean for the consumer?
- Borrowers with questionable credit will find it harder to qualify for a mortgage.
- The number of borrowers looking to buy homes will probably be reduced substantially.
- If borrowers who have questionable credit can’t refinance, they may be facing foreclosure.
- People who can’t buy will continue to rent so rents may increase.
- Hard money lending will become the only option for many. Learn how to swim with sharks.
- Look for credit counseling/improvement to be heavily marketed. Desperate borrowers beware.
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