Somewhere behind locked doors where the motif is best described as a late 70’s disco club, there sits a handful of banking executives studying the success of one of the few industries that continue to survive the current downward trends in our economy. That is right, I am talking polished brass poles and scantly dressed women. It comes down to making money off the bare essentials of what God has given us.
Okay… not really, but one lender has adopted the philosophy of offering only the bare essentials of the mortgage industry. And I am one to admit that lending needed to tighten up, but tightening up so much that things begin to fall off seems a bit ludicrous. Perhaps, they are going back to the old adage of “If it isn’t broke, don’t fix it.” So if we broke it, what do we need to do to fix it? Or more appropriately, when did we break, and how far back do we need to go to fix it?
Does it come down to if you play with it too much, you will break it? Did lenders play with it too much to where it broke? Or have they merely stroked it to the point where it needs a break? This lender has taken a vow of celibacy to minimize its exposure to the diseases that infest our market. One would think this lender has become a monk with minimalistic commodities at its use. They are no longer flaunting their goodies on the street; instead, they are seeking refuge in the heritage of their original conservative founders.
Now, this company that I will leave un-named (at this time anyways), announced to all its brokers in an email/memo that it is discontinuing loan products and modifying loan features. In other words, they are taking away all the attraction, the plot, and the music, and are leaving us with bare essentials just staring at us in the face. Some of these loan products are basic essentials to the mortgage financing industry, just like nudity is to porn.
Let’s look at some of the discontinued products:
- All 40 and 25 year term loans – That is like saying 1 hour is too long and 2 minutes is too short.
- All Adjustable Rate Mortgages (ARMS) – Whoa!!! Excuse me, but isn’t an ARM a financial tool(toy) offering a borrower more bang for their bucks? Does it matter if you are 3 inches or 5 inches, so long as you know how to use it? According to this lender, they want everyone to be at least 10-12 inches.
- FNMA Jumbo Loans – And yes, those who have the fetish of Jumbo action should still be allowed to partake when they choose.
Man, I hate to see how far they go with the loan features:
- Credit score must be 620 or higher for FNMA and 580 or higher for FHA. Uh, yeah I can see the point for screening to keep the disease out, but doesn’t Fornication Happen in Adults whereby screening is solely based on experience and past history.
- All loans must have Approve/Eligible or Approved findings. No excuses or exceptions. Either you got the goods that everyone wants to see, or you don’t.
- 30 year fixed with interest only options… don’t even think about it, unless you have a 720 credit score or higher and it is your primary residence. You can look, but you can’t touch… Unless, you got the keys to the mansion and satisfy every want and desire.
- FHA – 203k loans with LTV/CLTV greater than or equal to 103%… GOODBYE!!! No money, no honey.
- Almost all LTVs dropped 5%. Put up the dough, to see the show.
Well, I guess we will see how this act of Freedom from weighted down programs to thebare necessities works out for them. And if it does works, will we see other lenders disrobe to their whitey tighties? I would hate to think it goes this route, because taking away these programs is like taking away the magazines from under a teenagers mattress… everyone has their own ideas of what makes them happy.
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