Death of Sub-Prime Lending

By
Real Estate Appraiser with Chief Architect / Chief Innovator

I am afraid this may just signal the death of the subprime market, as we know it.

Wells Fargo & Co., Countrywide Financial Corp., Washington Mutual Inc., First Franklin, and Option One Mortgage will stop originating 2/28 adjustable-rate loans (2/28 ARM). This loan type accounted for 65 percent of all sub-prime mortgages last year. The FEDs have been applying a great deal of pressure on these lenders to underwrite loans at the fully indexed rate.

I hate to be the bearer of bad news, but I would want to know of a change like this as soon as possible.

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Rainmaker
168,257
Shawn Gerhardson
Waterstone Mortgage NMLS#186434 - Cambridge, MN
Top Rated Mortgage Professional
I might not be such a bad thing. Too many people were incorrectly put into these loans. Lets see if these helps curb foreclosures.
Jul 24, 2007 11:11 AM #1
Rainer
68,727
Kris Krajecki
Kris Krajecki - FOX VALLEY MORTGAGE - Huntley, IL - Huntley, IL
Mortgage Broker Huntley, IL

2 and 3 yr ARMS are great for investors who plan on selling and/or flipping within 3 years!

They will be back....I think they are gone NOW because the 30 yr fixed is so low right now!!!

Jul 24, 2007 11:45 AM #2
Rainer
49,825
Jacob Morales - Arizona Mortgage Planner
US Bank - Scottsdale, AZ
Investors with subprime credit have no business being investors IMHO. Regardless this is a good thing that subprime is becoming more responsible. These loans are just no good for a majority of people. If they can't afford they house then they have no business buying it. Period.
Jul 24, 2007 12:24 PM #3
Rainer
3,671
Brian Blanchard
Chief Architect / Chief Innovator - Saint Charles, MO

I must applaud all three of you.

It is amazing the number of people in this industry that have no concern for the borrower or the economy in general. I am so happy to see brokers refering to this change as something positive.

Jul 24, 2007 12:47 PM #4
Rainmaker
289,811
Kate Bourland
Marketing with Kate - Redding, CA
Onlilne Marketing Mobile Marketing

The subprime market is not sinking - it's just changing.  The products will come back and they should come back.  The problem is that people were put into loans that had no business being put into them.  For other's they were a godsend.  Too many people in our economy are ignorant of the realities of finances.   I wish that there were a way to improve the knowledge base so that good people would be less inclined to make bad decisions.

Jul 24, 2007 02:18 PM #5
Anonymous
Anonymous
Anonymous
Death of the sub prime lending?  I don't know about that.  I think it's just impossible to gain enough equity in 2 years to even consider a refinance in this stagnant market so it's very wise to only loan on 5 year fixed products in order to have 5 full years to earn some equity and better yourself from sub prime to an alt A or even A paper borrower. 
Aug 02, 2007 01:36 PM #6
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Rainer
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Brian Blanchard

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