David Neal's Mortgage Blog

I know that I've said that Conforming (Fannie Mae - Freddie Mac) loans, FHA, and VA were largely unaffected by all the mortgage woes........but I was wrong. Things are getting harder to do and every file is being underwritten line by line. Documentation is being scrutinized more and pretty much every thing in the file has to be just so so. It is because of this, that we are seeing the time it takes to process a mortgage increasing. In some cases, where everything is pretty simple, we can still push them through pretty quickly, but on everything else, just expect the process to take slightly longer. I'm not talking massive delays, just an extra week or so. All of this is because of several key factors. One is that pretty much all the lenders have written off all the bad mortgages they can and any new defaults are causing more of an impact and have been putting some lenders out of business. In addition to that, Fannie, Freddie, and FHA are being more carefull in the loans they insure or guarantee, which the lenders may get stuck with if they are kicked back for some reason. These two factors have the underwritters scared that if they put through bad loans that it could and has in fact, in some cases, bring the whole company down...putting them out of work. So they are being more cautious, not because underwritters are sadistic, but because they have to be. It is the process of going over a loan application line by line and cross checking all of the information, very time consuming and therefore slowing down the process a little. Please keep in mind that this is a stack of details the size of which, most people find it tedious just signing each page at closing.

So please be patient and just know, that things may take slightly longer and we may have to ask for a little more documentation through the process, but we still strive to bring you the best process and experience we can. If anyone has feedback about this, I would love to hear it...give me a ring!

Well, there sure is a lot going on in the mortgage markets right now. A few changes may shake things up a little. First, HUD has issued a ruling that seller funded downpayment assistance will be allowed. That is huge! Now, I have heard that FHA is coming out with a 100% financing program, but it's not out yet.....So anyway, right now it looks as though sales contracts have to be signed by October 31st. There have been several injunctions filed and I'll keep you posted on any new developments.

Here's another big one! Fannie Mae has made changes to the Expanded Approval guidelines and will no longer be doing 100% financing on EA-2 or EA-3 approvals. The max will be 95% on an EA-3 and 97% on an EA-2. Now the PMI companies all have different dates that they are changing their guidelines, So the cutoff dates vary depending on which PMI company that the lender uses. One thing is for sure, we only have really until the end of the month. Unfortunately, when Fannie Mae made changes to their automated underwriting system on May 19th, a lot of approvals being generated are Expanded Approval level 2 (EA-2). This means a lot more people are going to need downpayments!

In case you didn't pick up on the overall trend, here....The market is pulling away from 100% mortgages unless you have very good credit. This will delay quite a few potential homebuyers from buying while they save for the downpayment they will need. The market will probably suffer some while the overall attitudes and expectations change away from 100% financing.