Jul
20
Subprime Meltdown Continues…
July 20, 2007 | Leave a Comment
Just in case anyone is still wondering why no one is doing subprime loans anymore…
“There will be a ripple effect of forcing funds to rebalance their portfolios by selling things in a market where there just aren’t many buyers. Eventually there will be demand again for securities backed by subprime loans, because the higher-rated bonds in the subprime class are still decent investments. But that won’t happen until everybody takes a bath first.” - Guy Cecala, publisher of industry newsletter Inside Mortgage Finance (Forbes, July 18th)
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Jul
10
Minnesota Legislative Changes and Prohibited Predatory Lending Practices
July 10, 2007 | Leave a Comment
House File 1004 and Senate File 988 were passed by the Minnesota Legislature to protect consumers from alleged predatory lending practices. This legislation has resulted in significant changes to Homecomings’ lending policy. These policy changes are effective for loans closing (meaning the date the note is signed) on or after August 1, 2007. Loans currently in the pipeline will be honored; however, closing must occur no later than July 31, 2007. Loans closed after July 31, 2007 must meet the new requirements.Lending changes to occur in the state of Minnesota include:
- No doc or stated income documentation will no longer be permitted in Minnesota. Only full doc and limited doc programs are available. This applies to all lien and occupancy types.
- Payment Option loans will no longer be offered. Minnesota restricts loans with a negative amortization feature.
- ARMS will be qualified at the higher of the fully indexed rate or the note rate with a payment that will fully amortize the loan over the loan term. The definition of the fully Indexed rate that is used for qualification is the index rate at the time the mortgage is locked plus the margin that will apply after the expiration of the introductory interest rate. HELOC product is qualified at the prime in effect on the 1st day of the month the loan closes, plus the margin.
- YSP is included in a 5% limit on financed fees.
- Prepayment penalties will no longer be offered on any loan product.
- Net Tangible Benefit analysis is required on all refinance transactions. The new loan must provide a tangible net benefit to the borrower considering all of the circumstances including new and previous loan terms and cost of the loan.
- A residential mortgage loan may not pay off in full or part a “special mortgage” without a written certification from the borrower from an authorized, independent loan counselor. The counselor must indicate that borrower has received counseling on the suitability of the transaction. “Special mortgage” is defined as a residential mortgage loan subsidized by a non-profit, government or quasi government agency containing loan terms that substantially benefit the borrower. An authorized loan counselor means someone certified and associated or working for a recognized non profit agency, HUD or city or state governmental agency.
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