Forging Ahead In The New Lender Landscape Presented by: Cheri Miles August 28, 2013

Forging Ahead In The New Lender Landscape Presented by: Cheri Miles August 28, 2013

Mortgage Lingo SAFE ACT Fannie Secondary Market CLTV NINA QRM Hybrid ARM RR Ginnie QM Freddie SISA ARC MBS LTV DTI Negative Am REIT

Wild West Lending

Racing along…. • Before 2004 sub prime mortgages accounted for 8% of the market. • Between 2004 and 2006 that number jumped to 20%. • Of those 90% were ARM’s (Adjustable Rate Mortgages). • Debt to income load went from 38% to upwards of 77%. • SISA and NINA were created. • Hybrid ARMS were created for flippers HARM

Racing along……

Until The Wheels Came Off • In 2007 lenders foreclosed on 1.3 million properties • A 69% increase from the 2005-2006 level of 430,000 average • In 2008 the number jumped to 2.3 million • In 2009 that number rose again to 2.8 million

Barren Landscape

WHOA……

Lenders tightened up • Mortgage funding dried up overnight • Credit Score requirements jumped 200+ points • Down Payments of 5-20% were mandatory • 2 appraisals were required • Approvals took months • Underwriting criteria changed while the loan was in process

The loan approval process was like….

Forging Ahead

Slow and Steady • Underwriting Standards • Employment • Assets/Liabilities • Reserves • Debt to Income (DTI) • QRM/ QM • Qualified Residential Mortgage • Qualified Mortgage

Sensible Underwriting- The good ole’ Days • Employment • Minimum of ONE (1) year with the same employer or line of work • Self Employed- minimum of 2 years of self employment income • Savings/ Assets • The borrower needs to have a minimum 1% down payment

Sensible Underwriting- The good ole’ Days • Credit/ Liability • In general homebuyers require a 620 credit score or higher • Cash after Closing/Reserves • Most lenders require the borrower to have “reserves” after closing • DTI • Debt to income varies –generally below 50%

Round Up the Lenders • Interview the lenders in your area • Explain your project • What programs does the lender offer? • What are the credit requirements? • Create a list of interested lenders • Provide a list of area lenders to your homebuyers • NOTE: A HOMEBUYER IS FREE TO CHOOSE ANY LENDER WHETHER ON THE LIST OR NOT

Hitch your wagon to a good management team • Add a Housing Counselor • pre and post homebuyer education • Budget and financial counseling • Add a Realtor to your team • Marketing and sales information • Add a banker/lender to your team • Interest rates, market changes, and credit criteria

QRM- Qualified Residential Mortgage/ QM- Residential Mortgage • Definition….As of 7/25/2013- Rumored to be complete by the end of the 2013. • Proposals • Require the bank to have 5% interest in any loan sold to Wall Street if QRM is not met • Require the minimum down payment to be 20%, with some requesting a rise to 30% • Federal Reserve, Federal Deposit Insurance Corporation, Office of Comptroller of the Currency, Securities and Exchange Commission, Federal Housing Finance Agency and the Department of Housing and Urban Development, will soon release for comment a new QRM proposal

Contact: Cheri.Miles@dhcd.virginia.gov Any Questions?

Forging Ahead In The New Lender Landscape Presented by: Cheri Miles August 28, 2013