Nail in the Coffin

[Jellyfish]

surprised this has not gotten more press:

http://www.occ.gov/toolkit/newsrelease.aspx?JNR=1&Doc=M3ZM5FQW.xml

These are the new lending guidelines for large FIs. State lenders have to comply next month. Basically:

1) Income has to be verfied via IRS link, no more liar loans
2) Borrowers have to be qualified at full rate, not teasers

Once this works it way thru the system, it's going to take quite a few people out of the market.

 

[Mango]

I've been away a while, and haven't check all my memos yet, but that is not what I am getting from the OCC release.
It appears that they are stating that the Banks they monitor should be prepared to tighten their underwriting guidlelines regarding no income verification loans especially when it 1) concerns subprime Borrowers (less than stellar credit)
2) high Loan to Value Loans 3) piggybacks (HELOCs)

If a Bank is offering the product and they are not monitored by the OCC, (and quite a few are not) they are subject to the State Banking Department regulations, not the OCC, so I am wondering where you heard that this is trickling down to the State level?

From what I am reading in their recommendations, it appears that they will be monitoring the Banks HMDA reports very carefully now for these loan types, but they are not dictating what LTV's, credit scores etc. the Lenders have to use and they can not.

But when the OCC puts something out like this, their regulated Banks do not want want to be slapped on the wrist,written up, and forced to implement more CRA (Community Reinvestment Act) Programs, so they will tighten and tighten hard. So it's good. ;-)

As far as I am concerned, Borrowers should have always been qualifed at the cap rate on these loans which usually was around 9.95% or around that. I don't ever recall a Bank using the teaser rate for a basis to qualify, but something like the index plus 2%.

 

[Jellyfish]

Well, you know a whole lot more than I do on these issues, so thanks for the comments. The bank site I was on did say these same guidelines were moving down to state chartered bank level as a next step, I will see if I can find the link. Either way, sounds like things are tightening up (returning to sanity?) Geez, I remember when getting a mortgage was like going to the protologist in terms of data required, and took 3 months

 

[SHELLY]

Well, you know a whole lot more than I do on these issues, so thanks for the comments. The bank site I was on did say these same guidelines were moving down to state chartered bank level as a next step, I will see if I can find the link. Either way, sounds like things are tightening up (returning to sanity?) Geez, I remember when getting a mortgage was like going to the protologist in terms of data required, and took 3 months

Probably thinking about WaMu's recommendation:

"David Schneider, president of the Home Loans Division: We're still analyzing the Guidance so we don't want to speculate on what, if any, impact the new guidelines may have on our business practices. However, we believe that all mortgage originators should be held to the same standards. As a result, we encourage the state regulatory authorities to follow suit and issue the same guidelines so that consumers receive consistent disclosures and lenders have an even playing field. "

 

[Babyblue]

Probably thinking about WaMu's recommendation:

"David Schneider, president of the Home Loans Division: We're still analyzing the Guidance so we don't want to speculate on what, if any, impact the new guidelines may have on our business practices. However, we believe that all mortgage originators should be held to the same standards. As a result, we encourage the state regulatory authorities to follow suit and issue the same guidelines so that consumers receive consistent disclosures and lenders have an even playing field. "

Look at how time flys.

 

[SHELLY]

.
That was WaMu a year ago......Here is WaMu today:


“Washington Mutual Inc., the largest U.S. savings and loan, said third-quarter profit fell 72 percent as the company wrote off bad home loans.”

“CEO Kerry Killinger vowed in April to make WaMu’s mortgage unit profitable by year-end, a target that he now says won’t be met.”

“‘That is an unrealistic goal,’ Killinger said in an interview today. ‘Beginning in the third quarter, the whole environment changed to a severe correction, arguably some of the most difficult housing conditions we’ve seen in decades. The challenge for home loans grew much greater than what we could have seen in the second quarter.’”

“The home lending unit’s loss widened to $348 million from $23 million a year earlier. Washington Mutual lost $222 million on the sale of home loans in the third quarter.”

“The company plans to set aside as much as $2.9 billion this year to cover credit losses, up from a previous maximum of $1.7 billion. Washington Mutual may need to earmark as much as $1.3 billion in the fourth quarter to meet this level.”

“Washington Mutual ranked 11th last year among subprime lenders, according to trade publication Inside Mortgage Finance.”



Whoda thunk it would end up like this?


.

 

[Bob]

business cycle gone WILD

 

[Bob]

business cycle gone WILD

check that, asset class gone wild