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Subprime Lending is Back
Lenders have seen some of the worst economy conditions in the last few years, but new reports are indicating that subprime lending could be making a comeback. Subprime lenders have been around for some time, but during the financial crisis, many of them seemingly disappeared. According to online sources, subprime lenders are making a comeback with new nonprime loan offerings. Bill Dallas from NewLeaf Lending in California said, “There needs to be a solution for people who don’t fit in the box, and rebuilding nonprime lending is it.”
Subprime Mortgages' Modest Comeback
“Bill Dallas ran two subprime lenders that collapsed during the financial crisis. Now he’s back in business and plans to start offering what he calls nonprime loans later this year through his latest venture, NewLeaf Lending, based in Calabasas, Calif. “There needs to be a solution for people who don’t fit in the box, and rebuilding nonprime lending is it,” says Dallas. This time, he says, tougher lending rules will require borrowers to put down as much as 30 percent and document their income, credit, and work history.
Lenders are returning to the subprime market, although so far the lending is a fraction of what it was before the mortgage crisis. About $3 billion of subprime mortgages were made in the first nine months of 2013, matching the year-earlier period, according to Inside Mortgage Finance, a trade publication. In 2005, subprime originations reached $625 billion.”
Subprime lending explained in less than 2 minutes
With tougher lending rules out on the market today, consumers are sometimes required to put down up to 30 percent, including more documentation of your income, credit and work history. According to the numbers reported by Inside Mortgage Finance claimed that $3 billion of subprime mortgages issued in the first 9 months of 2013. A subprime loan is typically given out to a person that has a credit score of 660 or less. When the financial crisis hit, the lending companies that were giving out subprime loans were largely blamed for the crisis. Selling high-risk loans with adjustable interest rates that tripled after the first two years required little documentation from the buyer and that caused a huge wave of mortgage loan defaults.
That is when the federal regulators stepped in to restrict the number of high risk mortgages that ended up on the market. Lenders are now requiring credit scores that are much higher than in the past as well as more documentation. One credit group has started to offer subprime loans to those with a credit score between 550 and 599, but they were given a 9.75% interest rate and were required to come up with 30 percent as a down payment.
It would appear that subprime loans are making a comeback, but they are packed with requirements that many of today’s hardworking individuals simply cannot afford.
If you have any questions about the real estate market in Tampa Bay or foreclosures in Tampa please visit our Tampa2Enjoy real estate website.
Banks Are Pitching Home Equity Loans – Again
Banks just love the profits in home equity loans. They got burned in the late 80’s, they got burned in the 2,000’s and here we are again, 8 years later. But a lot of the problems with home equity loans are not because of banks, but consumers and state legislatures. Consumers have to be more responsible and state legislatures need to put in safety nets so consumers don’t get hurt. Texas is a great example of this. They weathered the recession better than any state in the union partially because the Texas Congress wrote laws stating what banks can and cannot do in their state. Unlike Florida.
Great article by Deon Roberts with Charlotte Observer
“Banks, eager to speed up their sluggish revenue growth, are returning to a business that lost appeal during the housing downturn: home equity lending.
Consumers are hearing the pitches in direct mail, in their inboxes, and in their bank branches. Lenders say the competition to capture home equity business is heating up – and they’re looking to sweeten the deals with flexible terms.
Banks see home equity as a growing market, with home prices rising in Charlotte and elsewhere. Some borrowers who once owed more than their homes were worth now find they have equity for the first time in years.”
What is a Home Equity Loan? – Explained
Unlike the vast majority of mortgage documents (Fannie Mae, VA, FHA) that have standard verbiage in them that does not let them take advantage of the consumer, HEL’s can be very tricky. So read everything before your sign anything.
If you have any questions about real estate in Tampa, Florida please visit our website.
New Mortgage Regulations Will Hurt Working-Class Homebuyers
This article goes over some important facts about government regulations that will not only cripple the real estate industry but hurt a lot of lower income and middle class families. If American’s knew a fraction of what our politicians (DEMS, GOP and Obama) are really doing with all these regulations there would be riots in the streets. I hope everyone takes the time to read this and get educated.
New mortgage regulations will squeeze working-class buyers
“Regulations that go into effect Jan. 1, 2014, prohibit banks from approving mortgages for anyone whose debt-to-income ratio is higher than 43 percent.
Banks also will have to limit the fees for originating mortgages to no more than 3 percent of the loan amount, which could discourage many institutions from pursuing loans for lower-priced houses.
“It will hurt working-class families buying homes for $75,000 or less,” he said. “Those loans will be classified as a high-cost loan. You are going to lose people in the mortgage industry looking at that segment. That's what we think will happen. Banks will make a better spread on higher-priced homes.”
Don Frommeyer, president of the National Association of Mortgage Brokers, said the 3 percent rule also will be a problem for mortgage brokers.”
The problem is that we keep on voting in these morons that have no experience running a business or understand what the long term effect is of the legislation they vote on. When they regulated the mortgage industry a couple years ago it caused many lower income families to not be able to get into their first home. NAR (National Association of Realtors) reports that as many as 25% (or more) of the mortgage loans are having problems because the government over regulated the appraisal industry.
NAHB (National Association of Home Builders) policy expert Jessica Lynch talks about the uncertainty regarding mortgage lending requirements and proposed regulations continue to harm the housing recovery.
If you have any questions about buying a home in Tampa or our real estate market conditions please visit our website Tampa2Enjoy.com.
Mortgage CEO’s Reward for Failure: $115 Million
Angelo Mozilo, the chief executive of mortgage lender Countrywide Financial Corp., drove his company to the brink of financial disaster.
Now he stands to make as much as $115 million in the servence-related compensation if an aquisition of Countrywide by Bank of America – announced on Friday – goes through, which it almost certainly will.
Mozilo made enormous sums running Countrywide during the boom times. He pocketed $160 million in 2005 and $120 million in 2006, mostly in stock option gains.
Countrywide and other financial outfits have faced tougher sledding in recent months with the bottom falling out of the mortgage market amid a tightening of credit for higher-risk loans. Countrywide's stock lost 79% of it's value last year.
Thank you to the TBO for providing this information.