As Real Estate Professionals, you need to be watching this situation as it unfolds with eyes wide open.
The "NoDoc" financing option has all but dried up in the mortgage market. Now, daily, investors are even running away from "Stated" style loan financing. It is critical that you tend to your clients and make sure you understand fully the financing being used. It is NOT ENOUGH that your clients have a loan approval and/or a rate locked. Investors are pulling the rug out from under products for which there is no longer an appetite in the secondary and tertiary markets.
This information is not just for Selling Agents to be aware of. Listing Agents, if you are not as knowledgeable about the prospective buyer's financing as can be released to you, you need to be thinking about your seller's well-being and understand that closing could collapse at the last minute if the buyer's financing is at risk of not funding.
Whether you are a Listing Agent or a Selling Agent, you have your client talk to a preferred lender with whom you are quite familiar and have a good working relationship. Selling Agents, please understand that Listing Agents will need to put your clients through this for the sake of the integrity of the transaction. All Agents, please explain to your client that they are not under obligation to use your lender, but, again, for the sake of the transaction, you must obtain a professional opinion from someone you know and trust.
Clients who come in saying they already are pre-approved with their own lender are not typically equipped to understand what could happen. It no longer matters if the lender is XYZ Mom and Pop Mortgage or a market standard like Wells Fargo or Countrywide. This situation is moving through the industry like wildfire and the home financing market is markedly, let me reiterate that, MARKEDLY different than it was even one week ago.
This is BIG! It will have major impact throughout the housing industry for the foreseeable future and, if you are not diligent to the highest degree, will bite you at some point. Your clients need to be qualified with a lender!!!
Please educate yourself on what is going on in the mortgage side of the transaction.
Johnnie Murphy, Global Marketing
Sunday, August 12, 2007
Keep Your Eyes Wide Open
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2 comments:
The default on mortgages is impacting every community and every neighborhood. The injection is only temporary (overnight) and will not cure the problem. There are simply too many loans being defaulted on, more bank owned Real Estate now than in any time in recent history.
Back in 1980 interest rates skyrocketed to 16-18% on mortgage loans. A three year adjustable at 12.75% was considered a "good deal". Conversely the cost of homes and building materials was lower at that time. 5-10% down was the norm.
Fast forward 25 years later, and we have inflated prices on gas, building materials, and home costs. It would follow that mortgage rates are likely to climb into double digits once again unless the market stabilizes. The next few days will be interesting indeed.
How long can they borrow from Peter to pay Paul?
I'm guessing, but I am pretty new to real estate, that if interest rates continue to rise and loans become even more difficult to get, we will continue to lose buyers and our buyers market will become what...a super buyers market with no buyers?
What should we be doing to better assist our clients? How can we feel comforted that a lender we recommend is going to be in business at the close of escrow?
I guess what I'm saying,is how does all this information apply to the agents in the trenches, to the everyday agent trying to pay tuition and a make their house payment?
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