Wednesday, April 9, 2008

WAMU – Out of Wholesale Business

In recent news…We can add another casualty to the Mortgage Lending business. Washington Mutual halted its Wholesale Division operation and will no longer “mak(e) loans through mortgage brokers”. They are also closing down 186 home lending offices and cutting 3,000 jobs as well.

See article “Washington Mutual Gets $7 Billion from TPG-Led Group”

Though not a significant blow dealt to me specifically, as an originator, it does remove another option for brokers to place a loan for a borrower. This comes in the face of the continuing credit crises and difficulty for Home Owners to refinance and for Home Buyers to purchase a home.

As I reviewed the available programs today, it became apparent that the Stated Income program is all but obsolete. We are looking to find a lender who will continue to fund Stated Income loans, but the truth of the matter is that 99% have removed the programs entirely. This is definitely a harsh blow dealt to all borrowers. The only question that remains is…when will these products return? 18, 24, 36 months…

At the core of this correction was the greed with which lenders used perceived values as a saving grace for those looking to buy or refinance a home. And as I have mentioned in previous articles, one should not bank on perceived values, a home is only worth what the next person will pay. Just like the shoes you wear are only worth the money you use to purchase them. Sure, sometimes people will over pay and according to this market people will wait to try and under pay to find a great deal as well. This, however, does not change the fact that this market correction is affecting everyone, and perhaps unfairly at best.

So, without further ado here are some tips as to approach your next purchase or refinance…

1) Make sure you can afford the payment. Do not be duped by someone else. Think about what you realistically make, learn your personality, and make a decision. If you think you will make more in the future, because you just have to…knock off 5% of your income. This may keep you safe.
2) Save for the house. Yes you can still find nearly 100% financing, they are hard to find in Arizona but it is a possibility. With changes to FHA limits and DPA programs it is possible, however, if you can’t (SEE #1) afford the payment. Take a deep breath and think.
3) Educate yourself on the process. Take a pro-active approach to your financial situation and seek out those who wish to teach and not those who wish to tell. If you haven’t learned something from your Loan Originator, they aren’t doing their job.
4) Good Luck and Hold On. I can’t say when this credit crunch and housing crises will subside. But I implore that you don’t give up on the house just because it is worth less than you thought. You made a loan and are responsible for the terms held within the note. A foreclosure is going to hurt you financially and in your future for a long time to come. Giving up usually leads to a huge hill that must be climbed again. Climb it now and save yourself the harm of trying to climb again, and again, and again.

Keep emailing and responding to the blog…I love the feedback.

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