Super Jumbo Seconds - Gone With the Wind

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Super Jumbo Seconds - Gone With the Wind
By: MortgageGuru , Posted On: 2007-11-19

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As of November 20, 2007, l

nders across America are mostly doing

way with Stated Super Jumbo Seconds

The s

b-prime meltdown actually began in December 2006, wh

n lenders did away with stated 100%

nvestor loans and it has gone m

ch, much further since then.

Estimated losses due to f

reclosure of Adjustable Rate Mortgages actually

djusting this year and next year are in the b

llions, if not trillions, and lenders are r

sponding by removing products from their p

rtfolios.

Like anything else, the mortgage market is dr

ven by supply and demand, and the s

pply actually comes from Wall Street B

nks who are willing to buy cl

sed loans from Mortgage Lenders. Wall Str

et had up until very recently, a s

emingly insatiable appetite for sub-prime loans, alt A l

ans, and jumbo loans. (The press has c

mbined everything that isn't A Paper

nto the heading sub-prime, when actually s

b-prime loans are loans with substandard cr

dit.)

Alt A Loans are loans that are A P

per loans, but with alternative documentation - st

ted income, stated asset, no doc,

tc.

And obviously Jumbos, Super Jumbos and M

ga Jumbos could be prime, sub-prime or alt a l

ans as far as the credit r

ting is concerned, and the documentation l

kewise could be any level.

The press and C

pital Hill with their multiple legislation

ttempts have all lumped together any l

an that is not fully documented, c

nventional loan limits and a plain v

nilla 30 year fixed rate into the now h

ted "sub-prime" category. Neither the press nor the l

gislators have the time or inclination to l

arn the vagaries of the mortgage b

siness and do their jobs "on the fly" as it w

re, and so, there is bad

nformation and misinformation flying everywhere.

With the l

sses Wall Street Banks are experiencing in f

reclosures of all kinds, they've lost th

ir appetite for anything other than str

ctly A paper loans. They aren't b

ying much, and so, the supply of m

ney for mortgages has gone to an h

storical low.
Stated owner occupied loans for p

rchases and refinances are topped at 90% ltv; st

ted investor loans for purchases and r

finances are also topped at 90%, and cr

dit score requirements s for everything h

ve gone up to levels previously r

garded as pristine. That is, of c

urse if your home is not a m

lti-million dollar purchase or refinance and th

n you are really looking at 65% to 70% m

x.

Estimates for the duration of this d

arth of funds range from six m

nths to two years. With the pr

grams available for refinances, and talked

bout to become available for refinances, to the r

tional mind, it seems that this sh

uldn’t last forever. The strange thing is th

t borrowers who are in trouble d

n’t seem to be trying to do

nything about their foreclosures because the n

mbers just keep getting larger every m

nth.

FHA Secure for instance will allow a r

finance of a mortgage already in d

fault, with no regard for the l

te payments if they occurred after the l

an’s interest rate adjusted.

The FHA is, in my

pinion, the sub-prime loan of choice – the r

tes are as good as, conventional

nterest rates, and when that is c

mbined with the fact that they IGNORE l

te payments, I would think people w

uld be clamoring for those loans.

Additionally, if the v

lue of a house has gone d

wn during this market turbulence, and the pr

perty was originally bought with a f

rst and a second, they will

llow the second to stay, even if the LTV g

es over 100%.

Fannie Mae and Freddie Mac are c

nsidering raising conforming loan limits above the $417,000 m

ximum presently allowed in order to

ssist borrowers in California (where nothing c

sts less than $417K). While this was r

garded as a probability earlier on, it s

ems to have lost steam lately.

And f

nally, there is the possibility of a w

rk out arrangement with the lender to wh

m one is late. While it may not be the p

rfect arrangement because at this point in t

me the fees allowable on forbearance w

rkarounds are still very high, there is l

gislation pending that will limit the

mount mortgage companies can actually charge for l

te fees, payoffs, forbearance, etc.

If you're b

ying one of those million dollar b

rgains, be prepared to appear at the cl

sing table with big bucks. If y

u're interested in refinancing your ARM, Get BUSY. Opp

rtunities abound, and the country is g

ing to be in trouble if th

y aren't refinanced.

The article Super Jumbo Seconds - Gone With the Wind was Submitted by MortgageGuru through Articles.GetACoder.com network. Here's the additional information: Traci Gregory is a 20 yar veteran of the mortgage business. She wrks for a lender who is ntionally approved for USDA Rural Development Lans; and does FHA, conventional, and Jmbo loans in Alabama, Florida, Georgia, Suth Carolina and Tennessee. She blogs at traci.squarespace.com/mortgage-central/ on "The shifting sands in the mortgage business. From Investor/Rental Loans to $10 million homes . . . interest only loans that will benefit you in lots of ways and others that will harm.

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