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October 8, 2012

Communication with Consumers in Today’s Mortgage World

Category: Published Articles,Subprime Home Loans – admin – 5:34 pm

One of the most critical aspects of adequate client communication is advising applicants of the risks associated with riskier products like adjustable rate mortgages and hybrid ARMs.

According to the ECOA, these risks include:

  • Payment shock when amortizing payments starts
  • Loss of equity in the house used to secure the home loan if the payment agreement enables negative amortization
  • The inclusion of pre-payment penalty terms being disclosed up-front
  • Additional fees associated with no-income mortgages.

By practicing ethical loan origination, borrowers will appreciate the wise financial counsel and are more likely to refer business your way.  The Interagency Guidance on Nontraditional Mortgage Product Risks that federal agencies drafted includes three model forms for disclosures for consumers who are considering nontraditional mortgage products. The State Guidance did not incorporate these model forms, but they are an excellent resource for lending companies that are trying to create a program for consumer protection.

The first document is a narrative description of interest-only mortgages and payment-option mortgages and a description of what happens to the loan balance under these types of lending arrangements. The second sample document is a chart that compares the impact of different home loan  features on principal balance and monthly payments. The third sample document is a monthly statement for payment-option loans that shows the impact of each payment choice on the amount owed on the lien. The use of these or similar disclosures shows a commitment to the goal of helping consumers make informed choices about nontraditional mortgages and subprime lending products.


July 6, 2011

5 Steps for Buying a Home with Bad Credit

Category: Home Financing Tips,Subprime Home Loans – admin – 12:10 pm

If you want to consider buying a home with bad credit, there are several important factors that will help you financing endeavors.  The first step is to obtain a copy of your credit report to see what accounts are reporting late and whether or not there are any errors being reported on your credit cards or loan payments.  It’s a good idea to know your scores and any obstacles before applying for a bad credit mortgage.  If there are issues we suggest addressing them before submitting your home loan application to a lending professional.

If you have a credit score below 620, you may need to come up with a bigger down-payment.  In most cases first time home buyers who have credit scores above 580 will only have to come up with a 3.5% down-payment on FHA loans as long as the borrowers have a good job and income that can be documented.  FHA still offers home loans to borrowers with a minimum credit score of 500, but if you fall below 580, the underwriter may request a more substantial down-payment.

Finding a bad credit lender can be cumbersome as many loan companies have eliminated their subprime loan programs for purchasing and mortgage refinancing.  There are still a few lending options for bad credit home loans, but mostly from government programs like VA and FHA.  The other popular conventional loans conform to the Fannie Mae and Freddie Mac criteria and they have tightened their guidelines significantly over the last few years.  When shopping bad credit mortgage lenders, make sure the loan representative understand your goals and credit credentials.  You want them to understand your credit and abilities for down-payments.  If the lenders do not offer VA or FHA home loans and you have credit scores below 620, chances are this lender will not be able to help meet your home financing needs. Once you find some lenders that meet your goals, make sure you compare “Good Faith Estimates” so you can evaluate the home loan rates and closing costs.

Buying a Home with Bad Credit

  1. Get a Free Copy of Your Credit Report (make sure the report shows your scores from all 3 bureaus)
  2. Verify Your Debt to Income Ratio and Credit Scores meet the lenders criteria for home purchase loans
  3. Compare Loan Quotes from FHA Lenders (make sure that your lender is FHA Approved to offer financing in your region)
  4. Obtain the Loan Disclosures from each Lender that is Quoting You Rates and Loan Offers
  5. Get a Pre-Approval in Writing from each Mortgage Lender


July 8, 2010

Wells Fargo Announces Significant Job Cuts in Consumer Finance

According to Mortgage News Source, Wells Fargo is laying off nearly 4,000 employees from its’ Consumer Finance Division that was responsible for non-prime mortgage lending.  The company announced that they were ceasing to originate subprime mortgages in an effort to mitigate loan portfolio risks.  Mortgage News indicated that Wells Fargo “had been struggling with delinquencies and loan defaults from their own bad credit home mortgages.”  Acquiring the loan portfolios from the Wachovia merger may have pushed their subprime risks too far.

Wells Fargo announced they were closing 638 Wells Fargo Financial offices, which increased its number of retail branches to 6,600 after the Wachovia merger. The bank also has 2,200 Wells Fargo Home Mortgage offices and will eliminate about 2,800 employees from its Wells Fargo Financial unit and will most likely slash another 1,000 jobs in the next year. Read the original news article, > Almost 4,000 Wells Fargo Mortgage Layoffs