Letters to the Editor
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Well, folks, this could have been predicted
when you allow for the fact that there was a little, totally underreported change in how mortgages are created that took effect for most borrowers about March 8. I mentioned in another post weeks ago that the mortgage insurance (MI) companies were going broke; well, as of March 8, most of them came out with new rules saying that their minimum FICO score went from 575 to 620 with a considerable down payment, and to a 660 (!) with a small one. Overnight. The last MI company (Radian) followed suit effective April 1.
So, let's combine what's new over the past 2 months: borrower FICO minimums are now at requirements tolerating NO credit blemishes just to get a loan with less than 20% down; maximum financing in most markets is reduced by 5% per the GSEs when the property is in a declining market county; Expanded Approvals (for less than perfect buyers) are no longer being accepted by most lenders; the 100% Flex program is now all but extinct; and the Fannie Mae stated income loan program--a superprime loan for the self-employed requiring excellent credit, proven assets and other strong credentials--is being phased out.
Basically, if I ran a convenience store with the scope of changes like these being put in my business, I'd have to tell 8 out of 10 customers they weren't eligible to play the lotto, buy milk, cigarettes, bread or the paper in my store. Yes, 80% of actual transactions, based on what I've seen over the past three years of all prime loans I've written, would be affected by these changes. The only thing buoying these numbers up was the rush to FHA programs, which don't have these considerations--yet.
Given all that, Andrew, how could ANYONE familiar with the housing industry think the sales figures would rise this spring? Here's my prediction: the next batch of figures will fall again.