has mortgage finance tightened too much?

[sniglet]

The Countrywide CEO is making the case that mortgage lending has over-reacted to the credit crisis, and has tightened criteria too much. Is this really the case? I know that lending standards have tightened in the last 8 months or so, but are lending standards really significantly tighter than they were in the '80s or '90s?

In fact, I still hear of the availability of 100% financing, and 95% LTVs. Were those kinds of product very hard to come across a decade ago?

Just how tighter from the lending norms of the '90s are we right now?

[Rhonda P]

I was in title/escrow in the 90's so I can't compare. I can say that I saw too much of "fog a mirror--get a mortgage" in the past few years...it was like "how low can you go" and everytime a wholesale rep would leave my office wanting to see files of "rejected borrowers"...they'd find ways to piece them together. It was sick and I'd politely decline except for when it made sense. Anyhow I'm off track, sorry!

I do think it is tightening too much. Now everyone (appraisers and underwriters) are overly paranoid and running scared. Almost every appraisal I submit is being picked apart, underwriters look for any fault...here's an example:

Interior/exterior photos are now required for most appraisals...one photo showed an empty clean living room (the borrower had just finished remodeling and had not moved his furniture back in)...the u/w is calling for a letter from the borrower explaining this and a copy of a most recent utility bill. This is a low LTV rate term refi with excellent credit, job stability...etc. (Doesn't own other property...does not look like a investment property to me..but this must be the u/w's concern).

New guidelines are coming over constantly. FHA remains the most solid and I must say (before you throw me to the wolves) that FHA is the same as it's always been (with the exception of "a little" easing on the appraisals)...it never became "loser" like Fannie/Freddie did. FHA works.

[sniglet]

[Rhonda P]

Sniglet,
I am thinking it's tighter than the 90's...at least it more hyper sensative...or paranoid. I'm sure that's a difference from the 90's.

I had an appraiser question that a house had too much pet odor for a refinance. This would have never happened before except the view point now is "what if this house is foreclosed on and it goes back to lender...will it sell?"

Things are hairy.

[sniglet]

[SeattleMoose]

Gotta love the media....nothing like getting a quote from a neutral party!!!

Mozillo? Are you kidding me? If he had it his way the wine and cheese party would still be going....

Anything less than the orgy of the last few years is gonna be "too tight" to one of key perpetrators.

Pinstripes for Orangelo!!!!

[rose-colored-coolaid]

[jillayne]

In answer to the initial question, "NO!"

Mortgage underwriting guidelines will continue to tighten as they well should, until default rates go down on loans that are being written today.

There were no bidders on the latest round of RMBS (Residential Mortgage Backed Securities) which means the market doesn't trust the current value of the investment.

Trust must be restored. We've had 8 or so years of "mortgage lenders gone wild." Expect at least 7 to 9 years of tough underwriting guidelines.

The pendulum never stops at the midpoint. We are always moving back and forth. I entered mortgage lending in the mid 1980s when we were still underwriting everything by hand and using typewriters to type government underwriting forms with multiple carbons. If you made one typo, you had to start all over again.

Repeat: Jillayne says:UNDERWRITING GUIDELINES MUST AND WILL GET TOUGHER. The sooner the better.

Of course rates could always go sky high. High yields to offset perceived risk could get investors buying again. But high rates means less affordability.

Expect both. Soon.

[sniglet]

[Ubersalad]

Look at it this way, any fifth grader can be a real estate agent and finance your house. Although it's nearly impossible to screw up as an agent since you really don't do much, but mortgage was a joke for far too long. If you couldn't get a mortgage in the last 4 years, your credit report must have something like 10 collections and no score.

[Rhonda P]

I would much prefer tighter guidelines than the loosey goosey I've seen. I am happy for those who had the chance to buy a home that otherwise would not have WHO are making their payments, being responsible and are not part of this mess. I think there are subprime mortgages and their are people with subprime habits. Two different things.

Appraisals and underwriters are hyper sensitive right now.

I've had a few more low appraisals. I've had a few low appraisals before...but now I'm wondering about every appraisal. If your appraisal comes back at value (even if doesn't) underwriters are picking them apart like buzzards.

No one wants to be blamed if the loan goes bad.

[jillayne]

[deejayoh]

I talked to a friend of mine tonight who is a mortgage broker. He told me that countrywide is still the lender of last resort - they'll still take the no-doc, liars loans that no one else will touch - even today

Anyone else in the business who sees similar things still going on?

[jillayne]

Well THAT explains why there are no current bidders for the recent vintage RMBS.

All the junk will eventually move to the hard money/private money sector.

Eventually the lifeline will be cut for all the junk originated by brokers, as it should. The impending collapse of the secondary market will put a fork in it.

The near future is: FHA, VA and conforming with tighter and tighter guidelies. For everyone else, there's hard money. For the lucky few, it will be First National Bank of Daddy.

[ira s]

Ubersalad said"
Although it's nearly impossible to screw up as an agent since you really don't do much"...

I'm not saying it's rocket science, but I've seen plenty of agents screw up.