HOUSINGNEWS REPORT
THE RETURN OF RISK: SUBPRIME SNEAKING BACK
U.S. MEDIAN DOWN PAYMENT TRENDS
MEDIAN DOWN PAYMENT
MEDIAN DOWN PAYMENT PCT OF MEDIAN HOME PRICE
10.0%
$20,000
9.0%
$18,000
8.0%
$16,000
7.0%
$14,000
6.0%
$12,000
5.0%
$10,000
4.0%
$8,000
3.0%
$6,000
2.0%
$4,000
1.0%
$2,000
0.0%
$0
For borrowers, the idea is to get financing today, re-establish credit, hope that local home values go up, and then refinance to a lower rate and smaller monthly cost. It’s not an easy path and it requires commitment. The Lenders’ Achilles Heel Mortgage originators have an Achilles Heel when it comes to identifying risk, both for prime and subprime borrowers, according to one industry expert who asked not to be identified in this article. The Achilles Heel ties back to a repercussion from the last housing downturn — exponentially longer foreclosure timelines that vary drastically from state to state and even county to county — making it difficult to accurately identify the presence and proper timestamp of a previous foreclosure action against a prospective borrower now applying for a new loan.
it was the establishment of a new mortgage marketplace. Going forward, said the government, lenders were welcome to originate a wide range of residential mortgages, including nonprime financing. What isn’t allowed are loans with insufficient underwriting and abusive terms. Even with passage this year of the Dodd- Frank fix, risk-reducing mortgage reforms remain firmly in place. In fact, Barney Frank, co-author of the landmark legislation, told CNBC that “it does not in any way weaken the regulations we put in there for the largest banks or that were there to prevent the kind of crisis we had 10 years ago.” In today’s market, non-QM financing is for those who in many cases are struggling, striving, trying to get past financial mistakes and hard times. It’s mortgages with by-the-book underwriting standards where every claim is verified and every file is thick
and fat. You can’t get these loans with just a pulse. The Ability-to- Repay rule sets the standard, and savvy mortgage investors, regulators, shareholders and insurers won’t accept anything less. As an example, Will Fisher of Citadel Servicing said its Verification of Employment Only program “was designed for increased efficiency and minimal paper work while also limiting exposure for the lender in the form of a higher down payment or up to 30 percent equity in the home. This program is ideal for line employees or service professionals such as bartenders, waiters and the like. In the same vein that self-employed borrowers take full advantage of the tax code and use bank statements to qualify for a nonprime mortgage, these individuals also have grey areas in regards to cash income. This program helps them to state their total wages for qualification.”
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JULY 2018 | ATTOM DATA SOLUTIONS
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