As a realtor, I know first hand that its important to keep pace with current events in the mortgage market place so that we can inform our buyers of how they will be impacted when purchasing or considering purchasing a home. I've enclosed an email from Mr. Bill Starkey, WR Starkey Mortgage, to his employees that I think you will find interesting:
From Bill Starkey to the Starkey Employees:
As you are now aware, we are seeing significant changes to low end fico's on FHA/VA loans. HUD, VA, Wall street investors and all major mortgage investors are definitely tightening up on government loans with fico's below 580 due to recent studies of delinquency and foreclosure rates on these properties. It has been estimated that government loans with fico's from 560-580 have a delinquency rate in excess of 20% and government loans below 560 fico have a delinquency rate of over 32%. With this said, there is really no difference between these mortgage loans and what we have come to know as "Sub-Prime" loans.
As the mortgage industry and Wall street continue to analyze loan losses, they are making major changes to high risk loans which is causing mortgage firms to react in quick fashion. In other words, there will be major limitations put on FHA/VA loans with low end fico's effective immediately and this will affect all mortgage firms in the same manner. You may have a few firms that are slower to make these changes but just as they all reacted in the Sub-Prime crisis, they will all react in similar fashion with government loans.
Effective immediately, no new locks will be accepted on FHA/VA loans with fico's below 560 and there will be a 3.00% adjustment to pricing on FHA/VA loans with fico's from 560-580.
To be honest, I am surprised that it has taken the mortgage market this long to react in this manner as these loans should really be put in the Sub-Prime category by definition. Again, this is not simply a WRS decision but one that will be followed throughout the mortgage industry in total.
One other thing to note on these changes........most mortgage competitors have eliminated all FHA/VA loans with fico's below 580 and we have still included loans with fico's between 560-580 but we do want underwriting approval before we allow you to lock these loans in with secondary. In other words, these loans will need to be solid and contain compensating factors that offset the lower fico score.
Thanks,
Bill Starkey
If you would like additional information regarding the above email or if you would like to contact WR Starkey Mortgage, please call me.
Regards,
Bernie
