The mortgage industry has been rocked by the news of several lenders shutting their doors. Most recently Sebring Capital, Meritage, Own It, and Aegis have pulled out of the market, and rumor has it they won’t be the last.

The question must be asked, is sub prime lending going away? Profit margins have shrunk, appetite on the secondary market seems to be waning, and lenders once thought to be strong are going out of business with no warning.

The reality is this – we got a little crazy over the past few years. There were loan programs out there that made little sense, and were based on the rational that the loans were such a small part of the portfolio, that they wouldn’t hurt.

Common sense went out the window in many cases, mortgage lates were ignored, income documentation was not required on customers with sketchy credit, and fictitious income was accepted without really being questioned.

Bottom line, you can sometimes get away with this when volumes are rising, but when volumes fall, the mistakes become a lot more obvious.

The good news is that subprime lending is here to stay. It is getting more automated and product lines are becoming more generic. As products become more like Alt-A, that will open up opportunity for lenders with an appetite for more risk as well as higher returns if done correctly.

Common sense lending is being forced back into the market, and as it does, EPDs and foreclosures will decline and profits will once again become the norm! Look for technology to be the key for successful lenders in the near future.

- Brett Reall

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 With mortgage rates up from their lows, many consumers wonder if they should hold off on buying a home, or wait for rates to go back down to refinance. With the costs associated with getting a new mortgage, this is a good question that often causes the potential borrower to consult many people who may not know the whole situation.For mortgage loans, many times family members are consulted, or friends, or co-workers. The advice received is may or may not be applicable as your personal situation could be different than that of those who are giving the advice.

For example, rate is not always the issue for all people. There are many instances where the interest rate of a loan is higher than your current rate but with debt that is paid off, your monthly payments could be significantly less.

Or there may be a situation where you need the money for investment or home improvement purposes. These are situations where you need to determine if the benefits of the loan justify the costs.

For debt consolidation purposes, the monthly savings when added up over a set term should equal far more than the costs that you pay for the loan. if the loan is a Adjustable Rate Mortgage (ARM), then the costs should be re-couped within the fixed period. If it is a Fixed Rate Mortgage, then the costs should be re-couped with in a 5 year period.

The key to a successful refinance is to define your goals before you apply for a loan. Write your goals down, and review them with each loan quote that you get.

Also important is to get more than one quote. Determine which one is best for your situation, and then make sure that when you close the loan, that your loan matches the quote that you were given!

Most importantly, while you are in the process of getting your loan, make sure that you make all payments, mortgage and consumer debt, on time. Never put yourself in the position of having a late mortgage payment because you were waiting for a loan!

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