The sub-prime meltdown actually began in December 2006, when lenders did away with stated 100% investor loans and it has gone much, much further since then.



Estimated losses due to foreclosure of Adjustable Rate Mortgages actually adjusting this year and next year are in the billions, if not trillions, and lenders are responding by removing products from their portfolios.

Like anything else, the mortgage market is driven by supply and demand, and the supply actually comes from Wall Street Banks who are willing to buy closed loans from Mortgage Lenders. Wall Street had up until very recently, a seemingly insatiable appetite for sub-prime loans, alt A loans, and jumbo loans. (The press has combined everything that isn't A Paper into the heading sub-prime, when actually sub-prime loans are loans with substandard credit.)

Alt A Loans are loans that are A Paper loans, but with alternative documentation - stated income, stated asset, no doc, etc.

And obviously Jumbos, Super Jumbos and Mega Jumbos could be prime, sub-prime or alt a loans as far as the credit rating is concerned, and the documentation likewise could be any level.

The press and Capital Hill with their multiple legislation attempts have all lumped together any loan that is not fully documented, conventional loan limits and a plain vanilla 30 year fixed rate into the now hated "sub-prime" category. Neither the press nor the legislators have the time or inclination to learn the vagaries of the mortgage business and do their jobs "on the fly" as it were, and so, there is bad information and misinformation flying everywhere.

With the losses Wall Street Banks are experiencing in foreclosures of all kinds, they've lost their appetite for anything other than strictly A paper loans. They aren't buying much, and so, the supply of money for mortgages has gone to an historical low.

Stated owner occupied loans for purchases and refinances are topped at 90% ltv; stated investor loans for purchases and refinances are also topped at 90%, and credit score requirements s for everything have gone up to levels previously regarded as pristine. That is, of course if your home is not a multi-million dollar purchase or refinance and then you are really looking at 65% to 70% max.

Estimates for the duration of this dearth of funds range from six months to two years. With the programs available for refinances, and talked about to become available for refinances, to the rational mind, it seems that this shouldn’t last forever. The strange thing is that borrowers who are in trouble don’t seem to be trying to do anything about their foreclosures because the numbers just keep getting larger every month.

FHA Secure for instance will allow a refinance of a mortgage already in default, with no regard for the late payments if they occurred after the loan’s interest rate adjusted.

The FHA is, in my opinion, the sub-prime loan of choice – the rates are as good as, conventional interest rates, and when that is combined with the fact that they IGNORE late payments, I would think people would be clamoring for those loans.

Additionally, if the value of a house has gone down during this market turbulence, and the property was originally bought with a first and a second, they will allow the second to stay, even if the LTV goes over 100%.

Fannie Mae and Freddie Mac are considering raising conforming loan limits above the $417,000 maximum presently allowed in order to assist borrowers in California (where nothing costs less than $417K). While this was regarded as a probability earlier on, it seems to have lost steam lately.

And finally, there is the possibility of a work out arrangement with the lender to whom one is late. While it may not be the perfect arrangement because at this point in time the fees allowable on forbearance workarounds are still very high, there is legislation pending that will limit the amount mortgage companies can actually charge for late fees, payoffs, forbearance, etc.

If you're buying one of those million dollar bargains, be prepared to appear at the closing table with big bucks. If you're interested in refinancing your ARM, Get BUSY. Opportunities abound, and the country is going to be in trouble if they aren't refinanced.

You'll find much more information at Traci's website http://www.georgiamortgagemoney.com